Supply of raw material remain firm in the market
Iron ore prices have risen to its highest level in the past two months and may be heading towards a further gain in prices over the weekend; as the Chinese mills have refilled their stocks and supply in the spot market remains firm. Chinese steel price rise have augmented a price hike in iron ore over the past two weeks. Although, the iron ore price hike has been much more compared to a price increase in finished products. This price gap between the raw material and the finished product has immediately cautioned the buyers.
According to the data provided by the Steel Index, iron ore of grade 62% rose by 1.1% to US$ 125.2/MT on Thursday, July 10, 2013, the highest price rise ever since May 15, 2013. Iron ore prices are up by 2.1% for the present week (08 July 13 to 14 July 13) and up by 7.5% from the previous week.
The most-traded rebar contract for the January delivery closed nearly at 3,656 Yuan (US$ 600)/MT and has increased by around 1% for the week on Shanghai Futures Exchange on Friday, July 12, 2013. Whereas, the price for the contract was up by 3% during the previous week.
An iron ore trader based at Shanghai said, “There’s still buying interest for mainstream cargoes from Australia and Brazil and there’s not a lot of supply available. But the increase in iron ore prices has been much faster than the increase in steel products, and things will only build pressure on margins of small mills.”
The rainy season has affected the production level from Australian mines, the world’s topmost iron ore producers. It’s because of the rains that quarterly production of the two giants such as Rio Tinto and BHP Billiton will be less than expected. Both these companies are to announce their production figures next week.