The ferrous market continued to sink on August 23, 2021 as spot fell and paper kept going overnight. Steel has not been updated:
There’s no respite for iron ore. Nor should there be. The glut means the price needs to fall to the highest marginal cost producer somewhere around $80, at best.
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The more interesting story today is coal which is still going bananas. Coking coal is still above $220 and thermal coal is at $170. Yuan Talks has more:
China’s benchmark futures of thermal coal, coking coal and coke futures all hit limit-up on Monday driven by market speculation of halted coal imports from Mongolia and amid growing concerns over continued shortage of coal supplies.
In the daytime trading on Monday, the most-traded coke and coking coal futures on the Dalian Commodity Exchange, for January delivery, surged by the daily limit of 8 per cent. The most active thermal coal futures contract on the Zhengzhou Commodity Exchange, for January delivery, also jumped by the daily maximum of 8 per cent.
In the following night trading session, the coke futures contract closing 10.1 per cent higher at 3,255.5 yuan per tonne, hitting a new record high of 3,267.5 yuan per tonne at one point in the session. The coking coal futures on the bourse surged by 9.2 per cent to close at 2,545 yuan per tonne, hitting an all-time high of 2,571 yuan per tonne at one point. The thermal coal futures contract gained 2.3 per cent to close the session at 851.8 yuan per tonne, touching the highest level since May this year.
The strong rally was trigger by market speculation that China’s Ganqimaodu border has been asked to suspend coal imports from Mongolia for two weeks due to Covid-19 testing, according to mainland industrial news outlet Futures Daily. The coronavirus outbreaks in Mongolia has worsened in the past two weeks and local officials have said the next peak of confirmed cases could be seen around mid-September.
This still looks very short-term to me. But while it lasts it will probably add even more pressure to iron ore as mills seek to destock it as an offset.