Indian iron ore export prices have once again started to go down last week. The FOB prices lost 3% to 9% as Indian sellers gave up and started to offer low in desperation to counter sparse interest from Chinese steel mills.
It seems that the weak sentiments in Chinese steel market have become much more dominant despite the drive of some of the Chinese steel majors to generate positive sentiments by announcing price hikes in last 15 days.
The signals of inherent weakness in Chinese steel market, due to high steel inventories and lower demand due to Chinese government’s policy to curb, were evident when the price setter BaoSteel did not toe the line of price hike announcement for benchmark product HR coils. It seems that they have been proved correct in their market assessment once again.
On the other hand, restricted availability due to ban of exports from Karnataka, logistic problems due to rains and closure of ports on western coast, which was propping up prices, seems to have caved in as Indian miners and sellers have started to offer low.
Incidentally freight market, which was supported by surge in iron ore, also has started to slip back. On August 25th BDI lost 88 points and on August 26th it went down further by 70 points to close at 2703. It has lost almost 6% in last 2 days from the recent peak of 2861.
Going forward, it is anticipated that the downward trend will remain till the sentiments in Chinese steel market improve. Moreover, as per media reports iron ore majors are reducing Q4 prices by about 10%.
We could be looking at USD 135 per tonne to USD 140 per tonne on CFR China basis soon from current levels of about USD 150 per tonne CFR for 63.5% grade.