Please recall that we had made prediction on 24th May in our article “Monday Market Monitor - Iron Ore - WEEK 20 - Dip before resurgence” that the rebound was round the corner.
The iron ore prices rebounded on 27th May after a month long slide. Although the rebound was restricted to the lower grades only by up to 3% but is expected to afflict fines Fe 63.5/63% in the coming days.
Following reasons were cited in our article “Monday Market Monitor - Iron Ore - WEEK 20 - Dip before resurgence”
1. The “Must sell” cargos, although the number can not be ascertained, would not be more than 15-20 thus totaling about 1 million tonne and would get exhausted in a week or 10-12 days ending desperation on seller’s side.
2. The ray of revival in Chinese domestic steel market has been rekindled with slight recovery in rebar prices in last 2 days of the week. If it continues, it would lend support to positive sentiments in coming days
3. One of the Big 3 is reported to have dropped USD 160 per tonne as opening shot for Q3 pricing, thus announcing hike of more than USD 50 per tonne as compared to USD 110 per tonne for Q2. Although, the final hike can not be guessed, possibility of hike should make Chinese buyers securing huge volumes of Indian iron ore on spot thus bringing back the life back into the market.
4. On the other hand, call for export duty hike has once again been heard adding uncertainty to market. Mr Virbhadra Singh Indian steel minister demanding raising of export duty on iron ore to 15% in an effort to rein in the spiraling prices and increase domestic availability of the product.
5. With the monsoon on the anvil around early June fears of restricted supply has spurred buyers to amass stocks before the availability in curtailed.
The buoyancy will depend a lot on the movements in the domestic prices in China which has maintained a flip flop trajectory keeping the operators at tenterhooks. However the sheer compulsion of the mills to assuage even normal level of consumption dependant on stock depletion provide the underlining strength.