Iron Ore Futures Weekly Report 2019.06.

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Analyst: TANG Binghua
2019 Iron Ore
License No.: F3038544
Futures Weekly Report
Email: gjywb@foundersc.com

Iron Ore Futures Weekly Report:

Replenishment of Steel Mills after the Dragon Boat Festival,
Iron Ore Price to Stay Firm and Remain Bullish

TANG Binghua, Research Institute of Founder CIFCO Futures

Market Outlook and Trading Advice:

Iron ore price dropped in June, mainly due to the seasonal weakening demand for steel products. With the
frequent rain in Southern China over the past two weeks, we’ve seen a sharp decline in the spot trading
volume of steel products. The spot price dropped and steel mills might be under maintenance which would
curb the demand for iron ore. Moreover, Australia and Brazil mines have increased their shipment and eased
the tight supply. The ports inventory is likely to pile up a bit in the coming two weeks. Currently, the
inventory is down to 120 million tons and it is very likely that the number would be 110 million tons later.
Iron ore traders are reluctant to sell their products as the inventory is declining. We could see that the futures
price has been declining while the spot price remains basically unchanged. There’s demand for replenishment
of steel mills though the iron ore inventory is low. There would be replenishment after the Dragon Boat
Festival, which could provide support for the price. The basis of contract 1090 has retuned to highs and
there’s not much room for declining for iron ore price, if there’s no further change to steel price. It is
suggested to buy nearby month contract and sell forward month contract or buy some long positions for short-
term investors.
As was discussed last week, the new real estate industry would support the demand for steel products for next
three months. However, the supply of iron ore remains tight due to the plunge of ports inventory. Therefore, it
is suggested to continue to long contract 1909 and the price is likely to top 800 CNY if the exchange rate of
RMB to USD keeps above 6.9.

Industrial Highlights:
1. Statistics from Ministry of Foreign Trade of Brazil showed that Brazil exported 29 million tons of iron
ore in May, a YoY decrease of 16.2%. The export price of iron ore is 65.60 USD/ton, an increase of 38.2%
compared with last year, 47.40 USD/ton.

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2019 Iron Ore Futures Weekly Report

2. JSW, Tata, JSPL, Jindal and other Indian steel mills urged the government to sell the iron ore
producing land to be expired on March 21st, 2020 in bidding instead of lease extension.
3. BHP has awarded a contract through its Local Buying Program to Gumala Enterprises, a Pilbara local
enterprise, in order to develop its Yandi iron ore project.
4. The Vargem Grande Dam, located in the Abóboras Mine in Nova Lima, Minas Gerais, Brazil, had its
Emergency Action Plan for Mining Dams (PAEBM) level reduced from 2 to 1.

Comparison between Nanhua Iron Ore Index and Nanhua Industry Index

Source: Wind, Research Institute of Founder CIFCO Futures

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2019 Iron Ore Futures Weekly Report

2019/6/ 6 Iron Ore Fundamentals

Futures Current Period Prior Period Up or Down Spread Current Period Prior Period Up or Down
I1905 595.0 621.5 (26.5) I1909- I2001 68.5 62.5 6.0
I2001 644.0 664.5 (20.5) I2001- I1905 49.0 43.0 6.0
I1909 712.5 727.0 (14.5) I1909- I1905 117.5 105.5 12.0
Imported Ore Current Period Prior Period Up or Down Domestic Ore Current Period Prior Period Up or Down
Carajas 65% 867 874 (7) Benxi 65% 645 645 0
BRBF 62.5% 820 822 (2) Hanxing 66% 902 902 0
PB Fines 61.5% 750 760 (10) Anshan 65% 645 645 0
JMBF 61% 734 745 (11) Qianxi 66% 845 845 0
Mixed Powder 58.5% 690 695 (5) Wuan 65% 710 710 0
Spread between
Different Premium of
Products Current Period Prior Period Up or Down Imported Ore Current Period Prior Period Up or Down
Carajas- PB Fines 117.0 114.0 3.0 Lump Ore 62.5% 0.339 0.3315 0.0075
BPBF- PB Fines 70.0 62.0 8.0 Pellet 63% 25.9 23.6 2.3
PB Fines- JMBF 16.0 15.0 1.0 Pellet 65% 30.7 28.3 2.4
PB Fines- Mixed Powder 60.0 65.0 (5.0)
Convert to
Basis Market Price Current Period Prior Period Up or Down FMG Ore Fines SSP Mixed Powder
Carajas 65% 904.3 309.3 290.3 19.0 This Month 11% 8%
BRBF 62.5% 904.3 309.3 285.0 24.3 Previous Month 13% 7%
PB Fines 61.5% 835.6 240.6 225.1 15.5 Up or Down - 2% 1%
JMBF 61% 831.9 236.9 213.7 23.2
Port Congestion
Port Inventory Total Australian Ore Brazilian Ore Trade Ore Lump Ore Pellet Days
Current Period 12158.00 5839.06 3618.03 5314.75 1390.96 560.20 12.50
Prior Period 12398.10 5770.04 3879.68 5246.20 1417.07 548.88 9.00
Up or Down (240.10) 69.02 (261.65) 68.55 (26.11) 11.32 3.50
Volume of Goods
Arrived at
Shippment to China Rio Tinto BHP Billiton Vale FMG Brazil Australia Northern Ports
Current Period 598.60 431.50 342.18 337.80 432.24 1791.70 991.20
Prior Period 534.80 427.60 283.56 400.60 373.56 1618.60 700.20
Up or Down 63.80 3.90 58.62 (62.80) 58.68 173.10 291.00
Domestic Mine Capacity
Output Large Scale Medium Scale Small Scale Utilization Rate Large Scale Medium Scale Small Scale
Current Period 6.90 1.20 0.10 Current Period 56.9 24.3 8.7
Prior Period 6.70 1.30 0.10 Prior Period 55.1 26.4 8.7
Up or Down 0.20 (0.10) 0.00 Up or Down 1.8 (2.1) 0.0
Operating Capacity Daily Evacuation
Rate of Blast Utilization Daily Sinter Daily pig Iron Port Spot Goods Transaction of Cargoes from
Demand Furnace Rate Consumption Output Volume Port
Current Period 71.41 79.47 61.15 199.47 164.50 295.79
Prior Period 71.69 79.55 59.88 195.07 156.00 289.89
Up or Down (0.28) (0.08) 1.27 4.40 8.50 5.90

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2019 Iron Ore Futures Weekly Report

Spot price of iron ores went down. By last Friday, the Platts 62% Fe CFR closed at 98.4 USD per dry
metric ton, down 1.45 %. The price of PB fines in Qingdao port closed at 750.0 CNY per wet ton, down 10
CNY. The price of BRBF closed at 820.0 CNY per wet ton, down 2.00 CNY. The price of JMBF closed at
734.0 CNY per wet ton, down 11.00 CNY. Overall, the price of domestic ore went up. The price of iron ore
with 65%-66% grade in Benxi, Hanxing, Anshan, Qianxi, Tangshan and Wuan closed at 645.0 CNY, 902.0
CNY, 645.0 CNY, 845.0 CNY, 665.0 CNY and 710.0 CNY per ton, all with an increase of 0%, 0%, 0%, 0%,
-0.60% and 0.00%.

The price of iron ore futures retraced from

highs. The price of contract 1909 hit a high of
726.5 CNY per ton, and a low of 692.5 CNY per
ton. The price closed at 712.5 CNY, down 14.5
CNY (1.99%). Active investment and trading
activities were witnessed and the daily transaction
volume of dominant contract decreased by 1.2364
million lots, with open interest decreased by
202,700 lots.

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2019 Iron Ore Futures Weekly Report

BDI closed at 1138.0, a week-on-week increase of 41.00, BCI index closed at 1826.0, a week-on-week
increase of 203.00.

The total shipment volume of iron ore from Australia to China was 17.917 million tons from May 31st,
an increase of 1.731 million tons. Brazil shipped 7.204 million tons of iron ore, an increase of 978,000 tons.
The total shipment volume of four large mines was 17.101 million tons, a weekly increase of 635,200 tons,
among which Vale shipped 3.422 million tons, an increase of 586,200 tons. Rio Tinto shipped 5.986 million
tons, an increase of 638,000 tons. BHP Billiton shipped 4.315 million tons, an increase of 39,000 tons. FMG
shipped 3.378 million tons, a decrease of 628,000 tons. 9.912 million tons of iron ore were arrived at northern
ports, a weekly increase of 2.91 million tons.

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2019 Iron Ore Futures Weekly Report

The total 45 port inventory of iron ore in China was 121.58 million tons, a weekly decrease of 2.401
million tons, among which the inventory of Australian ore was 58.391 million tons, a weekly decrease of
2.401 million tons, the inventory of Brazilian ore was 36.18 million tons, a weekly increase of 690,200 tons.
Trade ore reached 53.148 million tons, up 113,200 tons, pellet reached 5.602 million tons, down 261,100 tons,
lump ore reached 13.91 million tons, down 2.6165 million tons. 2.958 million tons of iron ore was transported
away from ports per day, up 59,000 tons compared with last week.

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2019 Iron Ore Futures Weekly Report

During May 11th to May 24th 2019, the capacity utilization rate of 266 domestic mines was 63.5%, up
0.77% compared with last week. Daily output of iron ore concentrates from 266 domestic mines was 410,000
tons, an increase of 4,900 tons compared with last week, among which the large mines produced 74,000 tons,
down 100 tons, medium mines produced 9,000 tons, small mines produced 2,000 tons.

The grade of sinter fines which were put into furnace blast was 56.03%, down 0.01% compared with two
weeks ago. The proportion of sinter ore which were put into furnace blast was 73.72%, up 0.18% compared with
two weeks ago. The proportion of pellet was 15.68%, down 0.04%. The proportion of lump ore was 10.77%, up
0.03%.

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2019 Iron Ore Futures Weekly Report

Last week, the operating rate of blast furnace from 163 domestic steel mills was 71.1%, down 0.28%.
The capacity utilization rate was 79.5%, up 1.6%. The number would be 82.81% once the obsolete
equipments were deducted. The capacity utilization rate for iron making from 247 steel mills was 79.45%, up
1.13% and a YoY increase of 2.67%. China’s daily output of pig iron reached 1.9792 million tons during the
mid-March, a decrease of 10,000 tons compared with February.

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2019 Iron Ore Futures Weekly Report

Last week, the total inventory of four domestic largest steel products was 14.024 million tons, a weekly
decrease of 142,500 tons (-1.01%). The inventory of steel rebar was 7.529 million tons, a weekly decrease of
107,400 tons (-1.41%). The inventory of wire rod was 1.803 million tons, a weekly decrease of 55,900 tons (-
3.01%). The inventory of hot rolled coil was 2.971 million tons, a weekly increase of 21,800 tons (0.74%).
The inventory of steel plate was 1.721 million tons, a weekly decrease of 1,000 tons (-0.06%).

Last week, 82.82% of steel mills in China made profits. Steel rebar of Shanghai quoted 4,036.00 CNY
per ton, down 62 CNY per ton. Hot rolled coil quoted 4,030.00 CNY per ton, down 28.00 CNY per ton. Gross
profit of deformed steel bar was 483.96 CNY per ton, down 84.46 CNY per ton. Gross profit of hot rolled coil
was 298.65 CNY per ton, down 54.37 CNY per ton.

This week, spread of PB fines and SSP in Qingdao port was 60.0 CNY per ton, down 5 CNY per ton.

The spread of BRBF fines and PB fines was 70.0 CNY per ton, an increase of 8 CNY per ton. The spread of

PB fines and JMBF was 16.0 CNY per ton, up 1 CNY per ton.
The premium of lump ore in Rizhao port was 0.3390 USD per dry metric ton, up 0.0075 USD. The
premium of pellet with 63% grade was 25.9 CNY per ton, up 2.35 CNY.
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2019 Iron Ore Futures Weekly Report

The spread of 1909 and 2001 was 68.5 CNY per ton, an increase of 6 CNY per ton.

This week, based on JMBF in

Rizhao port, the basis of iron ore

2001 was 192.78 CNY per ton, up

20.50 CNY compared with last

week, the basis of contract 1905

was 241.78 CNY, up 26.50 CNY,

the basis of contract 1809 was

124.28 CNY, up 14.50 CNY.

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2019 Iron Ore Futures Weekly Report

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