The seaborne iron ore market reversed losses Thursday, as an influx of buying
activity suddenly emerged in the spot market.
Platts assessed the 62% Fe Iron Ore Index at $116.25/dry mt CFR North China
Thursday, up $1.50/dmt from Wednesday.
A swift succession of trades took place Thursday after sellers found it
challenging earlier in the week to find any interest for their cargoes. "There
is some crazy buying out there today," a Singapore-based trader said.
A trader from a Hong Kong-headquartered trading house said he was very surprised
with the sudden volume of trades in the spot market, but concluded that the
buyers were mainly traders taking positions and not Chinese end-users.
"Confidence isn't that great among the mills yet, so the buyers are all
traders," he said.
Market
participants said it was about time for the spot iron ore market to flatten out
or recover some ground, after declining for the past couple of days, because
steel prices were on the rise.
"It's not the
right time for a huge slide in iron ore prices yet, as steel sales are doing
alright," a Beijing-based trader said. "Downstream demand for steel material is
also faring well, so I doubt we will see iron ore [prices] slide any longer."
Chinese
steelmakers have, since the start of April, been experiencing the traditional
seasonal boost to steel demand from the construction and infrastructure
development sectors, with productivity improving due to warmer weather.
Stronger steel
margins -- with some mills saying they are now able to make Yuan 100-200 for
each metric ton of steel sold compared with making losses earlier this year --
are also helping to support demand for iron ore, a core steelmaking raw
material.
Steel rebar
futures on the Shanghai Futures Exchange remained rangebound, with the most
actively traded October contract trading at Yuan 3,330/mt ($540.75/mt) mid-day
Thursday, up Yuan 1/mt from Wednesday's close.
A source at a
steelmaker in China's Jiangsu province said that he saw firmer buying interest
for iron ore after the Chinese government said last week that it would reduce
the reserve requirement ratio for some small banks, although little details have
been revealed so far.
"A lower cash
reserve requirement ratio [for the banks] is good news for the iron ore market,
as it boosts consumer confidence and aids steel demand," he said.
But others
remained skeptical on whether this would do much to alleviate the current credit
tightness in the country.
"Unlike the
three biggest banks in China, these smaller banks are minute and allowing them
to hold more cash reserves does little to inject the much-needed liquidity to
spur steel demand," said a Tianjin-based mill source.
Source: Platts
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