Most markets are closed in China but iron ore spot is trading, up $3.20 to $189.65.
In news, it’s all about scrap, via Platts:
Ferrous scrap has decoupled from stronger iron ore prices so far in 2021, as low coking coal costs and strong steel demand in China and elsewhere support iron ore consumption at blast furnaces.
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Scrap and iron ore tracked relatively closely in 2020, before the link between the two key steelmaking raw materials broke down this year, with scrap falling to the lowest price ratio to iron ore since August 2020.
The outright S&P Global Platts Turkey import HMS 1/2 (80:20) scrap to the China import iron ore 62% Fe fines IODEX price ratio fell to 2.22 on April 27, the lowest since the all-time record of 2.19 on Aug. 19, 2020.
The ratio averaged 2.56 in January-April compared with 2.67 in 2020 and 3.11 in 2019, when scrap prices were relatively higher to iron ore.
Scrap prices for imports into Turkey, as well as for US shredded scrap, followed sharply different dynamics in regional steel markets over the first few months of the year. Stronger hot-rolled coil prices provided greater support to higher-grade bushelling scrap and iron ore pellet prices.
With scrap-to-iron ore ratios still weak, a recovery for scrap is expected.
Turkish import scrap prices are expected by market sources to see strong near-term gains, as broader regional steel and scrap sentiment turned positive on China’s decision to remove a 13% value added tax rebate for the export of 146 steel products, including rebar and hot-rolled coil, effective May 1.
China’s finance ministry also cut the import duty on pig iron, crude steel and recycled steel — its term for what overseas markets call ferrous scrap — to zero from May.
The withdrawal of export rebates should encourage imports of scrap and metallics into China, and dissuade exports of commodity-grade steel products, which may compete for buyers with steel and billet producers in Turkey, North Africa, the Persian Gulf, India and rest of Asia.
That makes sense though I expect this will also play a role in deflating iron ore as it is displaced in blast furnaces. China already reached a new record for scrap inputs in April:
So far, the magnitude of the demand surge has overwhelmed both but as it fades through H2 we should see iron ore fall as scrap rises and the ratio normalise.