The seaborne iron ore market started the trading week on a weaker note, tracking a withdrawal in buying interest and a continued easing in end-user demand, resulting in trades being done at lower levels.
Platts assessed the 62% Fe Iron Ore Index down $0.75/dmt from Friday at $93.25/dry mt CFR North China.
Market participants said it was hardly surprising that spot iron ore prices had softened once again as the previous uptick was not supported by fundamentals.
"Demand from mills and traders is actually still pretty weak, while supply remains massive," a Beijing-based trader said. "Under such circumstances, any uptrend can only be said to be temporal and sentiment-backed, and we already expected it to end quickly, as it did. Now buyers see prices weakening again and they're waiting for even softer levels to start procuring at again."
Additionally, cheaper port stocks continued to divert buying interest away from the seaborne market.
Port stocks of 61%-Fe Australian Pilbara Blend fines in Qingdao, 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. This was a touch lower than the Yuan 620/wmt that PB fines were heard to have been trading at in Qingdao late last week.
Sources said there remained a wide spread between port stock prices and seaborne material, currently around $6-7/dmt at least.
This would drive mills, who already mostly have adequate stocks of ore after having bought more when prices were softer before the uptrend, to head to the docks to find cheaper material and smaller parcels.
A Shanghai-based trader said the credit flow among Chinese mills remained very tight, so forking out large sums for substantially more expensive seaborne cargoes was a poor option.
Additionally, industry participants said the supply overhang of iron ore was preventing a real recovery in price levels.
"We are seeing term prices at much higher levels than what spot material is trading at and the miners don't seem to want to budge to bridge this gap," a source at a steelmaker in eastern China said. "This has led to quite a few cases of non-performance on term cargoes, which the miners then have to divert to the spot market, worsening the oversupply issue further."
Meanwhile, a slide in the financial derivatives markets did little to aid already weakened confidence.
The most liquid September iron ore futures on the Dalian Commodity Exchange closed at Yuan 694/mt ($194/mt), down Yuan 13/mt from Friday, and settled at Yuan 699/mt, Yuan 14/mt lower.
"We've observed that the DCE iron ore futures have a very big impact on the market and on trading movement," a steelmaker in central China said. "When the DCE futures fall, we see that the room for negotiation to ensure sellers lower their offers for physical cargoes tends to widen. [Right now], buyers are holding back. There is not that much demand at all."
Steel rebar futures slipped the same way, with the most actively traded October contract in Shanghai last trading at Yuan 3,076/mt ($500/mt), down Yuan 12/mt from Friday, and settling at Yuan 3,078/mt, down Yuan 28/mt on the trading day.
Separately, the spot price of physical steel square billet remained unchanged at Yuan 2,730/mt ($443.75/mt) ex-stock Tangshan, a Beijing-based trader said.
