Iron Ore Indices On Multi-Year Highs

Iron Ore Indices On Multi-Year Highs

Iron ore prices soared in the international market as physical traders raise quotes over the supply concern.

The Chicago Mercantile Exchange Index (62% graded) settled at US$ 97.04 on 22nd May 2019, and the prices are currently trading at US$97.19 (as on 22nd May 2019 AEST 7:34 PM)

The prices on Dalian Commodity Exchange in China also surged and settled at RMB 728, up by 1.53% or by RMB 11.00 as compared to its previous close.

The index of port stocks and physical seaborne are constantly breaking multi-year highs amid raised global supply concerns. The iron ore port stocks are registering a constant decline and shipment across the 35 significant ports in China is also declining, which in turn is supporting the iron ore prices.

However, many steelmaking mills in China are keeping their hands off from the procurement process amid high iron ore prices and a decline in steel prices. The steel prices are declining in the domestic market of China, as compared to its recent high level.

The Steel Rebar on the Shanghai Future Exchange declined by 0.23% and ended the session at RMB 3910 on 22nd May.

Apart from the duo of raw material prices in the international market and falling steel prices, the upcoming holidays in China on account of Dragon Boat Festival are prompting mills to adopt a wait and watch strategy.

On the demand side, apart from iron ore inventories, the steel inventory in China is also marking a decline; however, the current environment of falling steel prices is preventing the mills from aggressive procuring.

If any factor which could boost the steel prices in the market emerges, the mills could go for aggressive procuring. The market participants should therefore keep a close eye on the development in the steel market, which is currently realising the negative impact of the U.S-China trade war.

Performance metrics:

In the steel and raw material market, the iron ore index across the CME and DCE delivered a significant rate of return.

Source: Thomson Reuters; Monthly Return (closing basis)

The Year-to-date return of the iron ore index (as of closing of 22nd May 2019) stood at 47.142% (CME Index), and the Year-to-date return on Dalian Commodity Exchange Index stood at 47.645%.

The iron ore prices marked a significant rally in prices and from the level of US$ 65.95 (closing on 31st May 2019) to the present level of US$ 97.19. The major appreciation in the prices was seen in April amid production loss from substantial Australian Iron ore Miners Rio Tinto (ASX: RIO), and BHP Billiton (ASX: BHP).

Apart from the production loss from Australian miners, the Brazilian giant- Vale also marked a production decline amid a ban on Brucutu Mine.

In the current summit in Barcelona, the miner also mentioned that it would take at least 2-3 years to restore the normal production level of iron ore production in the company.


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