Courtesy of ANZ:
Physical iron ore prices were unchanged at USD116.6. Talks of steel mills in China replenishing stocks supported the iron ore market the last couple of days, but weakness in the iron ore swaps (IOS) markets overnight suggests it could have been a false start. Front month Jun13 IOS contract declined USD3.83/t to close at USD114.5/t, while Jul13 IOS fell USD3.92/t to USD111.75/t. Interestingly, the Shanghai rebar futures market mostly gained across the curve, but there were declines in the Jul13 and Aug13 contracts, pressuring IOS. The declines could pressure physical iron ore prices today. Coking coal markets continued to drop overnight, down USD2.08/t to USD136.6/t, as coal exports from Australia’sGladstone port increased 17% m/m in May with producers still pushing volumes into an oversupplied market. Australian producers are struggling, but are pressured to keep coal volumes high due to strict take-or-pay contracts with infrastructure providers that mean they have sunk costs of about USD10/t for port or rail, regardless if they transfer coal.
