Iron ore rebounds as China sends mixed messages

Seaborne iron ore prices gained again on Tuesday as traders continue to expect a tight market. Scrap and billet prices slipped however as China continues to warn against inflation.

The Kallanish KORE 62% Fe index gained $4.86/t to $219.84/dry metric tonne cfr Qingdao. The Kallanish KORE 65% Fe index increased $4.61/t to $253.62/dmt cfr, and the KORE 58% Fe index inched $1.88/t higher to $188.15/dmt cfr. 170,000 tonnes of PB fines sold for $219.5/t with a laycan in 9-18 June.

On the Dalian Commodity Exchange September iron ore settled up CNY 41.5/t at CNY 1,232.5/t ($191.76/t), while on the Singapore Exchange June 62% Fe futures settled up $6.48/t at $214.01/t. The same contract for 65% Fe and 58% Fe futures settled up $6.40/t at $249.26/t, and up $8.99/t at $182.34/t respectively.

Chinese domestic scrap prices were still inching lower on Tuesday. 6mm+ heavy scrap delivered to mills in the Yangtze River Delta regions dropped CNY 10/t to CNY 3,929/t. In Tangshan, billet prices dropped CNY 70/t to CNY 5,470/t.

The National Development and Reform Commission continued to say China would use regulatory power to limit inflation in a briefing on Tuesday. It added that it expects producer inflation to peak in the middle of the year. The impact on the steel market is still uncertain, however. China now looks less eager to control steel production, as this would raise steel prices further. This will keep raw materials markets tight for the foreseeable future, however, supporting iron ore prices.

Tomas Gutierrez UK