The seaborne iron ore cended a two-day rally and dipped again Friday, tracking a withdrawal in buying activity as the fast spike and current supply glut hit spot purchasing.
Platts assessed the 62% Fe IODEX at $98.75/dmt CFR North China, down $2/dmt from Thursday.
Market participants said the uptrend over the last two days had taken place too quickly and Chinese buyers were once again hesitating on spot procurement as they found prices too high for comfort.
"Mills are still very cautious toward buying seaborne iron ore as steel margins aren't doing very well now," a Zhejiang-based steelmaker said. "Seaborne material is still too expensive for us to afford in such a situation and we'd rather buy cheaper port stocks in smaller quantities to minimize cost."
Port stocks of 61% Fe Australian Pilbara Blend fines in Tianjin, northern China, were heard to have traded at Yuan 680/wmt ($96.25/dmt on an import parity basis) free-on-truck, including Yuan 38/wmt in port charges and 17% VAT.
Additionally, a Beijing-based trader said port stocks had spiked to the 111 million mt level and there was simply too much material in the dockside market, forcing buying interest away from seaborne cargoes.
A steelmaker in Jiangsu said they had been given orders to keep iron ore inventories as low as possible, so they were maintaining around 20-30 days' worth of ore stocks, although he said some other mills were keeping as low as 10 days' worth of material.
"The problem is we are still dealing with losses that we made over iron ore cargoes we bought earlier, and this problem is made worse because whenever iron ore prices move up, they always far outpace steel improvements," the steelmaker said.
Another Singapore trader said Chinese end-users were very cautious with iron ore buying as there was a lot of uncertainty on steel fundamentals.
The same trader also said banks would be chasing mills for repayment of their quarterly loans and this would limit their ability to buy. "The Chinese mills are now trying to liquidate their port stocks in order to get some money to pay the banks," the trader added.
A trader in Zhejiang said the burgeoning spot supply of iron ore continued to put pressure on prices, cutting short any possible uptrend.
"There is a lot of material on offer around but actual acceptance by mills is still much lower as they know there is no real hurry to procure," the trader said. "There is no lack of spot ore if they want it."
"We did see some firming in prices [and sentiment] due to favorable PMI figures released yesterday, but the main problem is that there is just too much spot material available, so prices have to go south," said the steelmaker.
Meanwhile, the steel rebar futures market was mixed Friday, with the most actively traded October contract in Shanghai last trading at Yuan 3,081/mt ($499.50/mt), up Yuan 2/mt from Thursday, and settling at Yuan 3,083/mt, down Yuan 13/mt from Thursday.
