The seaborne iron ore market received support Friday from the futures markets and an improvement in physical steel performance, although most industry sources expressed doubts about whether the uptrend could last as it was not supported by fundamentals.
Platts assessed the 62% Fe Iron Ore Index up 50 cents on the day at $91.75/dry mt CFR North China.
Iron ore futures on the Dalian Commodity Exchange closed at Yuan 677/mt ($110/mt), up Yuan 14/mt from Thursday, and settled at Yuan 673/mt, Yuan 8/mt higher on the day, for the most actively traded September contract.
Steel rebar futures also climbed Friday, with the most liquid October contract in Shanghai last trading at Yuan 3,044/mt ($497.75/mt), up Yuan 35/mt from Thursday, and settling at Yuan 3,026/mt, up Yuan 12/mt on the day.
"The stronger rebar futures performance is strengthening market confidence for iron ore and more buyers are emerging to buy spot cargoes as they think the market might have stabilized at least for now," said a source at a mill in Jiangsu.
The same mill source in Jiangsu added that many sellers also had pushed up their offers from the day before as they said ore prices could be recovering in the shorter term after a prolonged decline.
Additionally, stronger port stock prices also lent support to seaborne levels, bringing about more positive sentiment among industry participants.
Port stocks of 61%-Fe Australian Pilbara Blend fines in Rizhao, 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% value-added tax, which went up Yuan 20/wmt compared to earlier this week.
Sources said there were more buyers seeking mainstream cargoes such as PB fines at the Chinese ports and this had helped port stock prices firm.
But the iron ore supply overhang remained a cause for concern for most market participants, who were skeptical about how any recovery in prices could be sustained when overall fundamentals still stayed weak.
"Port stock volumes in China have still not been able to go down, and Australian and Brazilian miners have been pumping in so much supply into the seaborne market at the same time," a Zhejiang-based steelmaker said. "In the later half of the year, this seaborne supply is not expected to ease at all, so supply and demand have not and will not achieve any balance, and this will definitely pressure prices down."
The steelmaker added that despite the firmer prices that miners like Rio Tinto and Vale have clinched for their spot tenders this week, all mostly going above $90/dmt CFR China, this only represented a limited portion of the market. Elsewhere at large, he said, actual trading activity was still lackluster, with mills remaining wary of buying seaborne material.
"Most mills aren't willing to buy seaborne cargoes upward of $90/dmt [CFR China], especially not full Capesize shipments," a Shanghai-based trader said. "The buyers this week have been mainly traders."
A Hebei-based steelmaker said that when prices went below $90/dmt earlier in the week, they decided to procure a bit more tonnage than their typical volumes but were once again easing back from buying now that prices were on the way up.
"We usually buy two cargoes a week, but this week we bought four before prices at prices below $90/dmt [CFR China]," the steelmaker said. "We felt that prices were low enough then and decided to take the plunge to restock for our steelmaking needs."
The steelmaker also said his longer-term outlook was pessimistic because downstream demand for steel was not holding up.
"Current construction projects in China have all been going on for a while and there aren't many new ones coming on to support steel. Besides, the real estate market is doing badly. There's not much to suggest that steel and iron ore can recover properly."
Separately, the spot square billet price in Tangshan remained steady from Thursday at Yuan 2,720/mt ($442/mt) ex stock, a steelmaker in central China said.
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