High Iron Ore Spot Price Suggests High 3-Month Ore Price for Japanese Steel Makers

Japanese integrated steel makers’ three-month iron ore purchasing price is likely to maintain high for October-December 2011 when spot ore price stays high. The spot price for June-August, the indicator for three-month contract price, would slightly lower by 1% from March-May. Strong Chinese demand is pulling up the spot price.

Spot price of Indian iron ore powder containing 62% iron was C&F US$ 177.5 per tonne against Chinese customers as of Wednesday, according to Platts, the U.S. information service company. The spot price still stays above US$ 170 though which had exceeded US$ 180 until May. The spot price is expected to average US$ 175 or more for June-August, slightly lower by 1% than in March-May.

The spot price is currently FOB US$ 169 excluding freight. The average for June-August would be US$ 167. Japanese integrated steel makers contracted three-month iron ore at US$ 169 for July-September. The price is likely to maintain the historically high level for October-December along the indicator.

Chinese iron ore import was 54.55 million tonnes in July. The import exceeded 50 million tonnes for 5 consecutive months. Chinese iron ore production increased by 27.3% to 124 million tonnes in June from a year earlier. The volume hit the monthly record and the annual production might approach 1.5 billion tonnes at the present pace. However, Chinese iron ore import keeps strong when domestic pig iron production continues high.

Indian iron ore export has decreased by 30 million tonnes per year since Government of Karnataka Province prohibited iron ore export since July 2010. On the other hand, the supply from Brazil and Australia was normalized for April-June, recovering from the supply trouble by heavy rain.

Iron ore spot price tends to show the same trend as Chinese steel product price. Ore spot price upturned in late June while Chinese steel product price represents gradual upward trend. Spot ore price may keep upward, too.