Most of China's domestic iron ore concentrates suppliers have refrained from cutting their prices further over the week after a substantial 9% reduction the previous week, as they hold back looking for clearer signs from the seaborne cargo market, according to sources.
Platts assessed China's domestic 66% Fe iron ore concentrate delivered to steel mills in Tangshan city in Hebei province in a slightly narrower range at Yuan 450-Yuan 460/dry metric ton ($70-$72/dmt) Friday, compared with Yuan 450-470/dmt a week earlier, both on cash terms and including 17% value-added tax.
The previous week's proactive move to cut prices in anticipation of weakening consumption from Chinese steel mills into December amid tightening cash flow has failed to yield much in the way of sales, officials from domestic iron ore mines admitted.
A procurement official from a 3 million mt/year steel mill in Hebei disclosed that they have been relying on iron ore supplies from term contracts despite prices being than on the spot market because of tightness in cash.
"We are really with little cash, so at least payments by letters of credit for term supplies will give us more time in full payments, and price is no longer the only or primary concern now," he explained.
Besides, many more mills in Hebei are mulling either retrenching employees or reducing their production if really necessary to trim costs and weather the month.
Under such circumstances, iron ore inventories should be as low as possible as mills need to be ready to cut production should other means of trimming costs be insufficient, market sources said.
Chinese miners, therefore, will not further reduce prices unless seaborne cargoes fall below $40/dmt CFR North China and hold there, they added.
Iron ore supply in China is not an issue at all, both from domestic production and overseas cargoes, which means Chinese mills can wait and pick up material on the spot market as needed, the sources agreed.
Indeed, iron ore inventories at the Chinese ports have been rising slowly.
As of November 27, the volume at 44 Chinese ports increased by 1.55 million mt to 87.65 million mt, the latest statistics from the Dalian Commodity Exchange showed, with the tonnage being sufficient for 27 days of steel output nationwide based on the present daily output level.
