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Mar.29.2024 1USD=7.095RMB
  SteelHome >>Raw Material>>Market Info>>Monthly/Annual Report
 
Monthly Report on China Iron Ore Market for November 2020

https://en.steelhome.com [SteelHome] 2020-12-03 15:27:29

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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.


(To contact the reporter on this story: cody.wang@steelhome.cn or 86-555-2238837 18725550282)
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