CRU: Iron Ore Near $150 /dmt on Increasing Market Tightness

Iron ore surged in early-December as Vale’s lowered guidance fueled concerns about iron ore availability going into 2021. Short-term market tightness also contributed to the rise as Chinese demand remained strong, while seaborne supply has continued to struggle. On Tuesday, Dec. 8, CRU assessed the 62% Fe fines price at $147.0 /dmt, an increase of $15.5 /dmt w/w. 

Last week, Chinese domestic HRC and rebar prices continued to march in opposite directions. While the HRC price rose by RMB120 /t w/w, the rebar price declined again by RMB60 /t. This precisely dictated the changes in supply-demand fundamentals. Given some BF maintenance, steel output dropped marginally last week. With quicker inventory drawdown, flat products demand lifted w/w, partly resulted from strong steel-containing goods exports. In contrast, steel long products demand dropped to the lowest level since late-August as temperatures dropped below the freezing point in many northern provinces. At current prices, Chinese steel margins are very high, so steelmakers kept operating intensively where possible. However, price decreases for steel long products over the last two weeks led some high-cost producers to conduct maintenance. This, coupled with stricter BF restrictions in Tangshan, resulted in lower surveyed BF capacity utilization. Having said that, steelmaking raw materials demand remained strong on the back of winter restocking.