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Iron ore prices under pressure despite supply-side issues - 13 January 2012

Iron ore prices came under pressure again on Thursday amid slow activity, despite further supply side disruption as Vale declared force majeure on shipments after heavy rains in southeast Brazil. The mining giant said around 2 million tonnes of material will be lost as a result, Steel Business Briefing heard. Australian iron ore shipments remained suspended after a cyclone passed over Port Hedland and the Pilbara region.

However, difficulty in obtaining letters of credit, ahead of the Chinese New Year, weighed on seaborne spot sales. Chinese producers that needed material were buying quayside inventory, but only in small volumes, one Henan-based mill source said.

Weak finished steel sales also impacted buying appetite. One Zhejiang-based company did not plan to purchase any seaborne material because of the poor steel market outlook, it said: in Tangshan city, Hebei province, ex-works prices for 150x150mm billet from major mills dipped RMB 20/tonne to RMB 3,680/t on a cash-payment basis with 17% VAT. The widely-traded May rebar contract on the Shanghai Futures Exchange closed at RMB 4,223/t, down RMB 1/t.

Platts 62% Fe assessment moved down $1/t to $142.5/t, while The Steel Index was stable at $142.2/t.

Prompt and further-out swaps came off heavily Thursday morning (GMT) with February done at $139/t, compared to an SGX settlement price of $144.25/t the previous day; March traded at $138/t compared to $142.50/t. One large miner and trading house came into the market later in the day, taking the falls to around $2-3/t across the curve, one broker said. Another source attributed the declines to the ongoing weakness of the steel market.

 

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