VINACHEM

Asian iron ore prices fell below the $100/dmt CFR China mark for the first time in nearly four months July 25, tracking lackluster end-user demand and bearish seaborne fundamentals, sources said.

The Platts 62% Fe Iron Ore Index, or IODEX, was assessed at $99.7/dmt CFR China July 25, the lowest since April 5 when it was at $98.5/dmt CFR China.
Trade participants expect the cost of raw materials to fall, as Asian iron ore prices remain plagued by weak margins amid a feeble downstream steel market.

In particular, the recent changes to China's national rebar standards further impacted the economy and dragged down market expectations, noted sources July 26.

"The new standards are already Yuan 30/mt costlier than the old standards. Mills are already facing tight margins and reselling their cargoes, any upward improvements prove hard to say for now," said a Chinese trader source.

Asian iron ore prices witnessed fierce market competition at around $100/dmt levels, which remains a key point of contention for most trade participants, said a Chinese steel mill, adding that "the recent sustained weakness in iron ore prices is primarily due to the impact of the new national standards, with steel prices leading the decline in raw material prices."

With persistently low steel mill margins, lower-grade discounted materials would be more cost-effective, the mill source said.

"Landing margins have largely diminished despite the recent downtrend in iron ore prices, with many mills choosing to buy on a need-only basis," a steel mill source said earlier in the week.

Mirroring similar views, another China-based trader source said that margins have been tight. "Resale liquidity is not strong enough to help anything out, the market is in a complete paralyzed state."

As a result, mills are currently just buying smaller volumes, often from port stocks when required, and generally keeping low iron ore inventories, according to analysts from S&P Global Commodity Insights.

With dampened downstream demand continuing to pressure raw materials prices, more mills are currently seeking to limit blast furnace operations and eyeing blast furnace maintenances, market sources shared.

"We have heard some mills either reconsidering their production levels or to carry forward planned blast furnace maintenance these days to limit the impact," an international trader source said.

China reforms fail to inspire confidence
Traders also took stock of the communique from China's Third Plenum, which revealed long-term development goals but little clarity on fresh stimulus amid its current economic struggles.

"There was also some expectation that the Plenum talks would conclude with some positivity on the country's [China's] real estate issues. The eventual lack of stimulus did bring down some market confidence, adding on to the already bearish market sentiment," the source added.

The Platts IODEX index is expected to average at $105/dmt CFR China in Q3, and at around $110/dmt for the full year, data from Commodity Insights showed.  – Platts –