China iron ore import prices from India up to $88-91/T cfr

China iron ore import prices from India up to $88-91/T cfr

Iron prices import prices to China have gone up $2-3 per tonne this week as Indian suppliers exploit the fall-off in Australian supplies, rumours of a clampdown on the iron ore trade, and confusion about the status of contract talks.

Transactions are thin and are mostly in the range $88-91 per tonne for 63.5% material, up from $86-88 per tonne last week. Australia is said to still be absent from the market, although both Rio Tinto and BHP Billiton have insisted they are still selling iron ore “as normal”.

China is threatening to push ahead with a planned cull of the number of companies granted import licences, and the detention of four Rio Tinto employees is also adding to uncertainty and giving some suppliers a pretext to raise offers.

“There is a lot of speculation out there still. The Indian suppliers are extremely bullish. They seem to feel that with the deadlock in the talks that the Indian cargoes are going to be preferred,” said one trader in Hong Kong.

Offers have been heard as high as $90-92 per tonne, although only a few rogue transactions were heard at that level. “Even though Australian side trickles back to the market in late July, the bookings will reach China in later August,” a trader in Beijing commented, “The chances are that Indian sellers and domestic traders, at least, can charge higher prices over this period of time.”

The iron ore benchmark negotiations appear to have come to a standstill, but most mills are now taking contract material with a 33% discount on last year’s prices pending any further moves. But China’s ministry of commerce indicated that some kind of agreement could still be announced.

It is thought unlikely that Rio Tinto will still be negotiating directly with the Chinese, given what has happened to their staff. "Indian and Brazilian iron ore suppliers are reluctant to actually conclude deals to the Chinese spot market right now, while Australian suppliers have also sharply cut their spot sales.

This has made market participants believe iron ore prices will go up further, and now we are trying to secure material from domestic traders," said one iron ore market participant. Rumours have strengthened this week that China may cut by 20-30 the number of companies which are officially allowed to import iron ore, encouraging some market participants The fact that steel prices in China have gone up this week, and that Baosteel – normally the country’s price leader – said its August prices will rise by 10% or more, is also a bullish factor.

" Baosteel just increased its steel prices higher than the market expected, and this will certainly shore up raw materials prices. Many traders are keeping a tight hand on their materials on hand in anticipation of better prices, especially when steel prices are rising quickly,” said another trader.

Much depends on whether and when a benchmark settlement is reached. The spot market price is now rising well above the level of Rio Tinto’s agreement with Japanese and South Korean steelmakers and most traders believe a public resolution of the talks is the most likely factor to bring prices back down again. “If there is some kind of statement about the long-term price then maybe you’ll see the spot price come off slightly,” said the first trader.

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