Iron ore hits new high

Seaborne iron ore prices surged on Wednesday alongside other ferrous futures, reaching new historic highs. Market participants are focussed on new environmental, tax and other policies which could emerge from political meetings starting in Beijing on Thursday.

The Kallanish KORE 62% Fe index gained $1.18/t to $175.79/dry metric tonne cfr Qingdao, a new historic high. The Kallanish KORE 65% Fe index gained $1.09/t to $199.29/dmt cfr, and the KORE 58% Fe index increased $1.07/t to $163.23/dmt cfr. 170,000 tonnes of PB fines sold at a floating price.

On the Dalian Commodity Exchange May iron ore increased CNY 19/t to CNY 1,152/t ($178.34/t), while on the Singapore Exchange April 62% Fe futures settled up $1.19/t at $170/t. The same contract for 65% Fe and 58% Fe futures settled up $1.49/t at $194.05/t, and up $0.68/t at $156.93/t respectively. In Tangshan, billet prices jumped CNY 140/t to CNY 4,410/t, the highest since 14 September 2011.

Iron ore prices have been supported by another rally in ferrous futures (see separate article). This was driven largely by deeper production restrictions in Tangshan. Short-term production restrictions have a small incremental impact on market supply. Underlying the price movement however is also speculation that China will move more aggressively to cut pollution from the steel industry by reducing output.

Iron ore miners meanwhile have been boosted by the suggestion that VAT on miners could be cut from 13% to 9%. This would be in order to support China’s goal of supplying 45% of the country’s needs. If confirmed, the policy is likely to be announced over the coming two weeks of political meetings.

Tomas Gutierrez UK