Seaborne iron ore prices tumbled $7.30/dmt on the week on weaker steel prices in China and a bearish outlook for downstream demand in the winter.
S&P Global Platts 62% IODEX closed at $159.20/dmt CFR North China on Dec. 31, down $7.30/dmt from Dec. 24.
The drop in temperature across China came later than usual, but Chinese market participants saw their ferrous market eventually enter a seasonal demand lull as end-user procurement slowed.
“Pig iron production and raw material usage will see a decrease as mills no longer need to catch up on output, there is limited support for another price uptick for iron ore amid the incoming cold wave,” said the procurement source.
Seaborne liquidity recovered slightly later in the week with a narrowed price gap between seaborne and port stock transactions. However, prices remained under pressure due to the clouded outlook for post-Chinese New Year demand.
Meanwhile, some market participants remained optimistic of a near-term demand increase on the back of restocking activities before the Chinese New Year holidays, and “potential weather impact in Q1 and blast furnace capacity replacement might still provide some support to prices,” an end-user source said.
While medium- to high-grade fines remained in demand to sustain production stability, steelmakers were considering the feasibility of utilizing more low grade-materials with cost-considerations taking precedence over production efficiency amid thinning steel margins.
Lump premium rebounded strongly on improving interest for both seaborne cargoes and mainstream port stocks. The limited supply and high cost of pellet cargoes also encouraged steelmakers to use more lump instead.
S&P Global Platts assessed the spot lump premium at 18 cents/dmtu on Dec. 31, up 5 cents/dmtu from Dec. 24.