The seaborne iron ore market reversed losses Thursday, as an influx of buying activity suddenly emerged in the spot market.
Platts assessed the 62% Fe Iron Ore Index at $116.25/dry mt CFR North China Thursday, up $1.50/dmt from Wednesday.
A swift succession of trades took place Thursday after sellers found it challenging earlier in the week to find any interest for their cargoes. "There is some crazy buying out there today," a Singapore-based trader said.
A trader from a Hong Kong-headquartered trading house said he was very surprised with the sudden volume of trades in the spot market, but concluded that the buyers were mainly traders taking positions and not Chinese end-users. "Confidence isn't that great among the mills yet, so the buyers are all traders," he said.
Market participants said it was about time for the spot iron ore market to flatten out or recover some ground, after declining for the past couple of days, because steel prices were on the rise.
"It's not the right time for a huge slide in iron ore prices yet, as steel sales are doing alright," a Beijing-based trader said. "Downstream demand for steel material is also faring well, so I doubt we will see iron ore [prices] slide any longer."
Chinese steelmakers have, since the start of April, been experiencing the traditional seasonal boost to steel demand from the construction and infrastructure development sectors, with productivity improving due to warmer weather.
Stronger steel margins -- with some mills saying they are now able to make Yuan 100-200 for each metric ton of steel sold compared with making losses earlier this year -- are also helping to support demand for iron ore, a core steelmaking raw material.
Steel rebar futures on the Shanghai Futures Exchange remained rangebound, with the most actively traded October contract trading at Yuan 3,330/mt ($540.75/mt) mid-day Thursday, up Yuan 1/mt from Wednesday's close.
A source at a steelmaker in China's Jiangsu province said that he saw firmer buying interest for iron ore after the Chinese government said last week that it would reduce the reserve requirement ratio for some small banks, although little details have been revealed so far.
"A lower cash reserve requirement ratio [for the banks] is good news for the iron ore market, as it boosts consumer confidence and aids steel demand," he said.
But others remained skeptical on whether this would do much to alleviate the current credit tightness in the country.
"Unlike the three biggest banks in China, these smaller banks are minute and allowing them to hold more cash reserves does little to inject the much-needed liquidity to spur steel demand," said a Tianjin-based mill source.
