Iron ore drops again as traders weigh impact of Brazil port closure

In Commodity News 26/01/2016

\Asian iron ore futures retreated on Monday as traders weighed the impact of the closure of a key Brazilian port by top miner Vale Sa that raised supply risks and lifted prices in the previous session. The modest losses on Monday show investors remain cautious, waiting to see how long the Port of Tubarão, shut by a Brazilian federal court on Thursday on pollution concerns, will stay closed.

Vale said the port closure has blocked the loading of 200,000 tonnes of iron ore per day. “I think the market is not really trading much as there is not really a clear picture,” said a Singapore-based trader. The most-active May iron ore on the Dalian Commodity Exchange was down 0.9 percent at 315.50 yuan ($48) a tonne by midday, after touching a two-week high of 324 yuan on Friday. On the Singapore Exchange, March iron ore slipped 0.6 percent to $38.49 a tonne. There may be a rush to redirect iron ore shipments to Vale’s other iron ore ports including Ponta da Madeira, Itaguaí and Guaíba Island terminal, said Mitchell Hugers, commodities analyst at BMI Research. With the use of the other ports, Hugers said there should be no impact on iron ore prices, with Australian producers also expanding output.

“The market will remain oversupplied due to a combination of expanding output by both Australian and Brazilian major iron ore producers, continued U.S. dollar strength and weak Chinese demand growth from the country’s steel sector,” said Hugers who sees iron ore trading between $35 and $45 in coming quarters. Iron ore for immediate delivery to China’s Tianjin port .IO62-CNI=SI climbed 2 percent to $41.30 a tonne on Friday, ending the past week almost 3 percent higher due to news of the Tubarão closure, based on data compiled by The Steel Index. Stocks of imported iron ore at China’s ports remain high, reaching 95.35 million tonnes on Friday, the most since last May, according to industry consultancy SteelHome.

Losses in iron ore futures came despite firmer steel futures in China. The most-traded May rebar on the Shanghai Futures Exchange rose 1.3 percent to 1,852 yuan a tonne.

Rebar and iron ore prices at 0346 GMT

  Contract                          Last    Change   Pct Change
  SHFE REBAR MAY6                   1852    +23.00        +1.26
  DALIAN IRON ORE DCE DCIO MAY6    315.5     -3.00        -0.94
  SGX IRON ORE FUTURES FEB         39.51     -0.54        -1.35
  THE STEEL INDEX 62 PCT INDEX      41.3     +0.80        +1.98
  METAL BULLETIN INDEX              42.2     +0.91        +2.20

Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day

Source: Reuters (Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)