Abstract
China’s iron
ore prices fluctuated at its lofty heights in November 2020, due largely
to the dropped stockpiles and well-performed steel market.
A
combination of the tight supply of
mainstream fines products and decreasing stockpiles amid robust demand
and decreased arrivals at ports may cause iron ore prices to keep
fluctuating at current high levels in December.
Trading
Tips: traders
are suggested to focus on iron ore sales. Mills are suggested to keep
the in-plant inventory at a normal level.
1. Review on
China Iron Ore Market in November 2020
In November
2020, China’s iron ore prices kept at its lofty heights, due largely to
the robust demand and dropped stockpiles.
As of
November 30, SteelHome
(China) Raw Materials Price Index (SHCNMI) was
151.27 points, up 5.75% month on month; China
Iron Ore Price Index (SHCNOI) was
158.14 points (971 yuan/t), up 3.96% from the month prior; China
Domestic Iron Ore Price Index was
138.83 points (976 yuan/t), up 2.73% m/o/m; 62%
China Imported Iron Ore Price Index was 130.61 dollars/t,
up 10.72% on monthly basis. * the m/o/m growth is calculated by the
average monthly figures.
On November
30, seaborne price for 61.5%-Fe PB fines was 130 dollars/t, up 13
dollars/t from the one on September 30. Spot price for 61.5%-Fe PB fines
was set at 895-900 yuan/t, up 30-35 yuan/t. In Tangshan, 66%-Fe iron ore
concentrate fines increased by 60 yuan/t to 1040 yuan/t.
On November
30, the most-traded iron ore contract on the Dalian Commodity Exchange
closed at 911.5 yuan per tonne, up by 117 yuan per tonne from the one on
October 30.
T1: China
Domestic-produced Iron Ore Concentrate Fines Price
yuan/t |
Hebei |
Hebei |
Liaoning |
Liaoning |
Shandong |
Shandong |
Anhui |
Anhui |
Jiangxi |
Fujian |
Hunan |
Hubei |
Fe |
66% |
66% |
66% |
66% |
65% |
64% |
65% |
65% |
64% |
65% |
64% |
63% |
Nov. 30 |
1040 |
1040 |
955 |
960 |
1075 |
1055 |
1068 |
1020 |
900 |
920 |
970 |
1000 |
Oct. 30 |
980 |
988 |
945 |
950 |
1035 |
1015 |
1009 |
1000 |
930 |
890 |
1000 |
1020 |
VAR |
↑60 |
↑52 |
↑10 |
↑10 |
↑40 |
↑40 |
↑59 |
↑20 |
↓30 |
↑30 |
↓30 |
↓20 |
Origin |
Tangshan |
Hanxing(tax free) |
Chaoyang |
Benxi |
Laiwu |
Linyi |
Huoxiu |
Fanchang |
Xinyu |
Longyan |
Xiangtan |
Daye |
T2: Imported
Iron Ore Price at Main China Ports
yuan/t |
61.5%
PB fines |
60%
Jimblebar fine |
56.5%
Super Special fines |
65%
IOCJ |
62.5%
BRBF |
Ocean
Freight
(dollars/t) |
Nov. 30 |
130 |
895 |
900 |
862 |
865 |
775 |
790 |
1010 |
1015 |
910 |
910 |
13.815 |
7.118 |
Oct. 30 |
117 |
860 |
870 |
830 |
830 |
785 |
785 |
990 |
990 |
905 |
890 |
15.095 |
7.1 |
VAR |
↑13 |
↑35 |
↑30 |
↑32 |
↑35 |
↓10 |
↑5 |
↑20 |
↑25 |
↑5 |
↑20 |
↓1.28 |
↑0.018 |
Note |
Seaborne
Price (dollars/t) |
Qingdao
Port |
Tianjin
Port |
Qingdao
Port |
Tianjin
Port |
Qingdao
Port |
Tianjin
Port |
Qingdao
Port |
Tianjin
Port |
Qingdao
Port |
Tianjin
Port |
Brazil
to China |
WA to
China |
Source:
SteelHome Database
*Need More
Data? Just Click
SteelHome Database (Microsoft's Windows
Version)
2. Iron Ore
Supply-demand
China
imported 106.74 million tonnes of iron ore in October, up 14.9% from the
one in the same month last year, data showed by the General
Administration of Customs of China (GACC). Daily import decreased by
4.8% month-on-month. Cumulative imports during Jan-Oct 2020 totaled
975.204 million tonnes, up 11.2 percent year-on-year.
China iron ore output reached 78.42 million tonnes in October 2020, up
by 545,000 tonnes from the one in the same month a year before, the
latest data showed by National Bureau of Statistics of China. Cumulative
output in the first ten months of this year was 714.506 million tonnes,
up 1.9% from the one in the same period last year.
Meanwhile,
the pig iron output was 76.171 million tonnes in October, up 9.4% from
the same month last year. Cumulative
output in the Jan-Oct 2020 was 741.699 million tonnes, up 4.3% from the
one in the same period last year.
3. Iron Ore Inventory
3.1 Port Inventory Dropped after Previous Rises
According to
SteelHome survey, iron ore inventory at 46 main Chinese ports was 130.3
million tonnes as of November 25, 2020, up 1.35 million tonnes from the
one in late October 2020.
Daily iron
ore shipment was 2.9755 million tonnes in November 2020, down 7,000
tonnes from a month before. Daily iron
ore arrivals at five largest Northern ports (Qingdao, Rizhao, Tianjin,
Caofeidian and Jingtang) reached 1.595 million tonnes in October
2020, down 137,500 tonnes from
October 2020.
3.2 Global Iron Ore Shipments & Arrivals to China Dropped
Brazil:
October’s export of iron ore was 31.19 million tonnes, down 17.6% m/o/m,
and down 8.6% y/o/y. According to Ministry of Foreign Trade of Brazil
(Secex), by November 22, November iron ore export from the country was
21.64 million tonnes. Then the November volume is estimated to be around
29.5 million tonnes.
Australia:
October’s export of iron ore was 77.89 million tonnes, up 3.4% m/o/m,
and up 10.4% y/o/y. By November 22, the November iron ore export from
Australia was 52.58 million tonnes. Then the monthly volume will be
around 71.7 million tonnes.
4. Trending
Discussion
4.1
Vale Informs on Serra Leste
Operation Resumption
Vale SA informs
that it received the Installation License (LI) from the Environment and
Sustainability Department of the State of Pará (SEMAS) for the
resumption and the expansion of Serra Leste operations, in the city of
Curionópolis (PA), which have been halted since January 2019, after
reaching the limit of the area previously licensed for the extraction of
iron ore.
In the coming
weeks, maintenance will be carried out for the safe resumption of
operations in December. Serra Leste, which has a production capacity of
6 Mpty, is expected to produce around 4-5 Mtpy in 2021, reaching its
full capacity in 2022, following the planned resumption activities
ramp-up. The expansion project, which consists of the adaptation and
repowering of the existing plant, will allow a capacity upgrade to 10
Mpty, with start-up expected in the first semester of 2023.
The return of
Serra Leste is another step in the stabilization of iron ore production
and on the way to the return of the production capacity of 400 Mtpy.
4.2
Vale Informs on the
Norte/Laranjeiras Dam
Vale S.A.
informs that it started, on a preventive basis, the Level 2 emergency
protocol for the Norte / Laranjeiras dam, of the Brucutu mine, in the
municipality of Barão de Cocais, MG. In this sense, with the
collaboration among Vale, the municipal and state Civil Defense of Minas
Gerais and other authorities, the removal of residents within the dam’s
Self-Rescue Zone, estimated at 34 people, will begin in the next few
days.
Vale adopts
this measure in line with the monitoring of the safety conditions of its
structures and maintains a geotechnical investigation campaign in order
to define the actions for their continuous improvement. The rise in the
emergency level reflects a conservative approach by the company,
although no relevant changes have been observed regarding the safety
factors of the structure. The company informs that the Norte/Laranjeiras
dam does not receive tailings and, therefore, has not been part of the
iron ore production plan since December 2019.
The removal
will be done on a scheduled basis and conducted by the Civil Defense,
with the shelter of families by Vale. The company will provide all
necessary assistance to the families until the situation is normalized.
Vale
reiterates that its priority is the safety of people and communities
downstream of its operations, as well as the safety of all its
structures.
4.2
Vale, Chinese Port Sign $651
Million Deal on Iron Ore Storage, Processing
Vale (NYSE:
VALE) and China’s Ningbo Zhoushan Port have signed a deal to invest
around 4.3 billion yuan ($650.6 million) in iron ore storage and
processing facilities in Zhejiang, a local government statement said on
Friday.
The move
follows the two firms’ inauguration of a grinding hub at the port in
eastern China in August and further boosts Vale’s presence in the top
global consumer of the steelmaking raw material.
Vale, the
world’s second-biggest iron ore miner, and Ningbo Zhoushan Port will
each hold 50% in the joint venture (JV), whose planned creation was
flagged in a filing last month. It will have registered capital of 1.5
billion yuan.
“It is
proposed to build an iron ore storage yard, with a maximum capacity of
4.1 million tonnes, an ore blending and processing facility and two
shipping berths,” Zhejiang Free Trade Zone said on its official Wechat
account.
The blending
and processing facility will have annual capacity of 21 million tonnes
of ore per year, it added.
“The
construction of this project will further strengthen the distribution
capacity of the Shulanghu ore transfer terminal,” the statement said,
referring to the site of the grinding hub, where Vale is producing
high-grade iron ore fines.
4.2
Vale Signs MOU with COREX, Wechat
Mini Program of Yuan-priced Iron Ore Spot Trading on the Way
Vale has
signed Memoranda of Understanding (MOU) with Beijing Iron Ore Trading
Center Corporation (COREX) on the sidelines of the third China
International Import Expo (CIIE 2020) on 10 November, 2020.
The two
parties will launch Yuan-priced Iron Ore Spot Trading Wechat Mini
Program (WeChat applet) in early 2021, to boost trading activities and
facilitation. Users can reach the real-time trading activities on their
smart phones.
“The Program
is one of the key components of Vale’s plan in digitalization of iron
ore B2B trading, showing Vale’s efforts on customer-centric innovation,”
said Bruno Pina, Managing Director & Head of Sales China at Vale Metals
Shanghai Co.
“COREX will
work with Vale to facilitate e-business with China’s steelmakers,
boosting trading activities and streamline procedures,” said You Song,
President at Beijing Iron Ore Trading Center Co.
Meanwhile,
Wang Yingsheng, Deputy Secretary General at China Iron and Steel
Association, gave the congratulations to the two parties. He said it is
pleased to see the cooperation and development of Vale and COREX made.
“The innovation will increase trading transparency and openness,
bringing added value in China’s steel industry and ensuring continuous
supply of high-quality iron ore products to China,” Mr. Wang added.
4.2
JSW Steel to Ramp Up Production for
51% of Iron Ore Need
Billionaire
Sajjan Jindal-headed JSW Steel plans to ramp up iron ore production from
its captive mines as it becomes costlier to buy it from the open market.
The steelmaker targets to meet 51 per cent of its iron ore requirement
through production from captive mines by March 2021. At present, 27 per
cent of the ore supply happens from captive sources, says Seshagiri Rao,
Joint Managing Director and Group CFO, JSW Steel.
"By end of
this financial year, about 85 per cent of the iron ore requirement for
the Dolvi plant will be met through supply from captive mines. Salem
plant will get entire requirement of ore, while the Vijayanagar plant
will get much lesser 35 per cent of its requirement from our mines.
Overall supply will be 51 per cent of the requirement," he added.
JSW Steel
acquired four iron ore mines -- Jajang, Nuagaon, Ganua and Narayanposhi
-- in Odisha in February. These mines have 1,131 million tonne reserves,
which constitute about 60 per cent of the whole reserves of iron ore in
Odisha. Once these four blocks function with full capacity, it is
expected to produce around 36 MT per annum and meet about 70 per cent of
its requirements. The steelmaker has three more mines in Karnataka where
availability is going up from 4MT to 7MT.
The rise of
steel price is helping the producers with captive mines at present to
improve the margins. The international price increased 16 per cent in
Q2. However, the iron ore prices also spiked in parallel because of high
demand in China.
JSW Steel
posted a 37.77 per cent year-on-year (YoY) fall in net profit at Rs
1,593 crore for the quarter ended September 30. Total revenue increased
by 9.63 per cent YoY to Rs 19,264 crore. The company achieved an average
capacity utilisation level of around 86 per cent for the quarter
vis-a-vis 85 per cent achieved in the second quarter of the previous
year.
JSW Steel has
reduced its consolidated debt by Rs 1,600 crore in Q2 to Rs 52,900
crore. Excluding the acquisition cost for Bhushan Power & Steel and
Asian Colour Coated Ispat, the steelmaker will not engage in any major
capital expenditure that can increase the debt, said Rao. "Most of our
major investments, including the capacity doubling to 10 million tonne
at Dolvi, will end in this financial year. The remaining projects will
be less capital consuming," he said
The company
plans to bring down the debt to EBITDA to 3.75 times by March 2021 from
the present 4.73 times. "JSW Steel will be the major investor in newly
acquired entities, but we will not consolidate them with the flagship
company. For instance, JSW Steel will spend for the equity portion of
the acquisition of Bhushan. But the debt will be raised on the books of
Bhushan and it will have to make the repayments from its cash flow," he
said.
JSW Steel,
among India's top two makers of the alloy, raised $500 million through
an offshore bond and Rs 4,000 crore through non-convertible debentures
(NCDs). JMD Rao said that the capital buffer will help them weather the
market volatility unhurt. "This fund is not for acquisitions. We had
created the capital cushion for acquisitions in the last financial year
itself," he added.
Rao said that
the steel demand is surging, especially because of the high orders form
automobile, solar, appliances and packaging industries. As the domestic
demand picked up, JSW Steel reduced its low margin exports -- which
reduced to 28 per cent in Q2 from 57 per cent in Q1. It increased the
sale of high-margin value added products in Q2 and helped in enhancing
the EBITDA. Value added products constituted 51 per cent of JSW's sales
mix in Q2, compared to 38 per cent in Q1.
5. Outlook on Iron Ore Market
5.1 Supply
Iron ore
shipments from Australia and Brazil decreased in November, with a large
amount of reduction from Australia and Brazil reflecting on December’s
arrivals. SteelHome considers that the iron ore arrivals at China’s
ports may drop in December.
Meanwhile,
the supply of China domestic-produced iron ore concentrate fines would
keep broadly stable amid barely changed mining operations.
5.2 Demand
Demand for iron ore may remain robust in December as China’s blast
furnace operating rate still at lofty heights, weaker-than-forecast
production curbs and few drops in China’s pig iron ore production.
5.3 Inventory
China’s
portside iron ore stockpiles may edge down, due largely to the dropped
arrivals, tight supply of mainstream fines products and robust demand.
5.4 Price
Forecasting
A combination
of the tight supply of mainstream fines products and decreasing
stockpiles amid robust demand and decreased arrivals at ports may cause
iron ore prices to keep fluctuating at current high levels in December.
6. Trading
Tips
Steelmakers are suggested to keep the in-plant stockpiles at a normal
consumption level.
Traders are suggested to focus on iron ore sales. |