The seaborne iron ore market strengthened Thursday as sentiment was propelled up once again after iron ore and steel derivatives continued to push up.
Platts assessed the 62% Fe Iron Ore Index up $2/dmt to $95.75/dry mt CFR North China.
Sources said the derivatives markets were receiving support from expectations that the Chinese government would come out with some initiatives to support economic growth.
"Premier Li Keqiang has already come out to say that they will maintain the GDP level at at least 7.5% so we are anticipating some some small policies that will boost growth," a Shanghai-based trader said. "This will be good news for the steel and iron ore markets."
The swaps and futures markets reacted to these positive macroeconomic factors Thursday by showing significant gains on the day.
Iron ore swaps picked up momentum, a trend that sources said began late-Wednesday and extended all through Thursday. Platts assessed the front month July IODEX swap at $97.50/dmt CFR North China, up $1.50/dmt from Wednesday. Iron ore futures on the Dalian Commodity Exchange closed at Yuan 717/mt ($116.50/mt), up Yuan 24/mt from Thursday, and settled at Yuan 708/mt, Yuan 17/mt higher on the day, for the most actively traded September contract.
Steel rebar futures also gained ground, with the most liquid October contract in Shanghai last trading at Yuan 3,115/mt ($506.25/mt), up Yuan 36/mt from Wednesday, and settled at Yuan 3,100/mt, up Yuan 27/mt on the day.
But market participants remained mixed over buying interest levels among Chinese steelmakers Thursday.
A Hong Kong-based trader said that he was receiving a good level of buying inquiries from several mills now that the market was "up, up", as he described.
"It's hard to say for the longer period but in the shorter term, prices should be supported and buying interest steady," the trader said. "Steel consumption is not doing that poorly in any case, despite the hot and rainy weather in China. Mills are still seeing their steel inventories moving, so their procurement schedules for iron ore are quite active."
A procurement source for a northern Chinese mill agreed, saying that steel margins were still "pretty healthy" and mills were making "decent profits", making steelmakers inclined to maintain current steel production levels.
"Mills need to restock on seaborne ores for their needs as domestic ore production isn't high," the source said.
However, several Chinese end-users said that restocking up on seaborne iron ore was not a priority for most mills in the country currently.
"We've already done a lot of replenishing earlier when prices were even weaker so there's no need for us to urgently buy seaborne shipments now," a steelmaker in central China said. "Some large mills have up to two months' worth of ore in their facilities now and it's very sufficient."
The steelmaker added that there had been a shift in buying strategies among Chinese mills of late. In the past, there was large-scale buying when prices were going up as mills were afraid of being stuck with higher prices to come, and the reverse would happen when prices were softening.
"Now mills won't buy a large amount of ore at any one time; they will buy from time to time when they feel they have a need to fill or when they personally believe that prices are low enough," the steelmaker said. "This is why prices won't crash from a huge buy-off by mills at any one time."
Meanwhile, sources also said that port stocks were still a lot more palatable for steelmakers than seaborne cargoes because they were a lot cheaper. Dockside 61%-Fe Australian Pilbara Blend fines at Shandong ports in northern China were heard to have traded at Yuan 610/wmt ($86.50/dmt on an import parity basis) free-on-truck, including Yuan 35/wmt in port charges and 17% VAT.
Port stocks of 57.5%-Fe Australian Yandi fines in Shandong also were heard to be trading at Yuan 560/wmt ($78.75/dmt on an import parity basis) free-on-truck, inclusive of Yuan 35/wmt in port charges and 17% VAT.
"Port stock volumes haven't been moving much so there is plenty there for the taking," a source from a large mill in eastern China said. "It's all very puzzling to me how seaborne prices have been spiking because mills haven't been buying much at such expensive levels; it's mainly traders buying up the physical market to provide support for their earlier positions on the derivatives markets."
In the meantime, the spot price of physical steel square billet remained unchanged on the day at Yuan 2,720/mt ($442/mt) ex-stock Tangshan, a Beijing-based trader said.
