Japan Major Steels Concern High Iron Ore Cost for Oct-Dec

Japanese integrated steel makers concern iron ore consumption cost in October-December could keep high as July-September level. Iron ore spot price index increased by around 27% in a month, according to Platts while the level is lower than the peak in April. Integrated steel makers’ quarterly purchase price would decrease by more than 10% for October-December from July-September if the index would keep the current level. However, the price will be higher than April-June level and the consuming based cost would be as high as July-September level due to the time lag between shipping and arrival.

Platts’ index iron ore price was C&F US$ 147 per tonne for Indian fine ore with 62% Fe to Chinese market on Friday. The index is lower than the peak of US$ 186 in late April but the price hit bottom of US$ 116 in mid-July. The index surged since then and recovered the highest level in 2 months.

Chinese iron ore import increased by 8.5% in July from June, which was the first increase in 4 months, and recovered first monthly 50 million tonnes in 2 months. The supply side factor also impacts on the iron ore sport market when the supply decreases after Indian state of Karnataka, which represents 20-30% of Indian iron ore export, banned iron ore export from end of July.

Japanese major integrated steel maker estimates current iron ore spot price represents FOB US$ 135 per tonne. The makers’ purchase price would be just less than FOB US$ 130 for October-December based on averaged spot price in June-August if the spot price would keep the level through August. The expected quarterly price is higher than US$ 120 in April-June while the price is lower than US$ 147 in July-September.

The lower quarterly iron ore price at around US$ 130 per tonne is good for steel makers. However, their iron ore using cost in October-December could be almost same level as July-September. The using cost would be around FOB US$ 136 level in October-December compared with US$ 138 in July-September when the transport takes around month from shipping to arrival while the iron ore inventory at works could have another impact.