Find below the iron ore price table for June 25, 2013:
As you can see, the iron ore market is weakening across the board. Rebar futures rose slightly. As did weekly Chinese iron ore port stocks, including those source from India.
The reason is simple. From Iron Ore Team:
Spot iron ore prices are likely to retreat this week with mainland mills holding off on restocking amid concerns over a cash squeeze in the world’s top market, which is already reeling from slower steel demand.
Shanghai steel futures fell yesterday, tracking steep losses in mainland equities on worries that the central bank would keep money tight and economic growth could slow sharply.
The most traded rebar contract for October delivery on the Shanghai Futures Exchange dropped 1.2 per cent to close at 3,450 yuan (HK$4,320) a tonne.
The People’s Bank of China said overall liquidity in the financial system is at a reasonable level, after interest rates for short-term funds spiked to extraordinary levels last week as big commercial banks held back on lending in the interbank market.
A liquidity squeeze may prompt steel mills to rush to sell their inventory of steel products, resulting in lower prices that will hurt their profitability or widen their losses, an iron ore trader in Hong Kong said.
“It will make mills very reluctant to buy more iron ore, and we could see steel production cuts in July. These are tough times,” the trader said.
That could cut appetite for iron ore, stalling a rally that lifted benchmark prices to near one-month highs last week.
Bids were scarce yesterday on trading platforms GlobalOre and the China Beijing International Mining Exchange despite plenty of cargoes on offer, traders said.
The recent rally in iron ore prices looks fragile, Macquarie Securities said.
“The fundamentals paint a mixed picture – steel production has remained high, but seasonality suggests it should be falling soon, iron ore inventory is low but not critically low, and steel inventory has fallen significantly but remains at an elevated level,” it said in a note.
The falls so far are unremarkable and the 12 month swap still looks strong so no cause for panic, yet.
