Commodities group Glencore said Wednesday iron ore trading volume increased marginally in 2017 as it rebounded to profit for the business among a widening in pricing by grade with less low grade demand in China expected.
Glencore traded 47.7 million mt of iron ore in 2017, up from 47.1 million mt in 2016, the Swiss trader said in a report. Glencore booked adjusted EBIT of $7 million for iron ore, from a loss of $9 million in 2016 on the same basis.
Iron ore reference prices averaged 22% higher at $71/dry mt CFR China in 2017, on 2016. While the benchmark rose last year, higher quality grades such as 65% Fe fines, some concentrates and feeds, pellets and other products won higher relative price premiums, especially through to October, while lower quality ore discounts widened.
Glencore said while the overall supply of iron ore may increase in 2018, a decrease in low grade cargoes exported to China may be seen, as steel margins incentivised purer less-polluting grades.
"In 2017, we believe iron ore prices decoupled from iron ore fundamentals, by following steel margins instead," Glencore said.
"Iron ore split further into different market segments: the price of low grade iron ore continued to decrease throughout the year, while higher grades benefited from improving steel markets, hence overall prices remained at fairly high levels," the report said.
"Discounts for lower grade and high silica cargoes have now reached a level that is starting to elicit a supply response."
Glencore's prepayments to iron ore suppliers to be repaid through future iron ore deliveries over two years as of December 31, 2017, totalled $1.172 billion, down from $1.571 billion in 2016. A total $1.092 billion of the amount prepaid is provided by the bank market. "The repayment terms of which are contingent upon and connected to the future receipt of iron ore contractually due from the counterparty."
