Spot activity in the Asian seaborne market for iron ore nudged higher in 2023, a year that saw Chinese steelmakers drift between positive and negative margins, as market participants placed bets on government policies to shore up a post-pandemic economy.
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Register NowAs firm demand by Chinese mills pushed the country's iron ore imports to a record volume of 1.18 billion mt, the quantity of iron ore price data points – or heards – published by Platts, part of S&P Global Commodity Insights, rose 2.9% to 26,958 last year. These were in relation to fines, lump, pellet and concentrate cargoes.
Of the total, heards for seaborne cargoes largely on a CFR China basis accounted for the bulk of information published, 71%, while heards for Chinese port stock cargoes that trade largely on a FOT China basis made up 29%.
Price information reported on a fully transparent basis to Platts via its Market on Close assessment process, however, slipped 19% on the year to a total of 775 data points in 2023.
Information reported via the MOC is done on a named and firm basis, and is subject to guidelines to allow for the testing of price levels in the open market. Platts prioritizes such information in the price assessment process.
While the volume of such data points fell, the number of bids reported rose to 40 from three the previous year, in part likely as market participants sought to publicize their buying interest in a year of steady iron ore demand and a lack of meaningful production cuts.
Through the year, 91 offers and 11 trades were reported via the MOC process.
Reflecting the size and importance of China in the iron ore spot market, Chinese companies accounted for the bulk of information reported to Platts, with 43 steelmakers and 47 traders from the country.
A further 31 international trading firms, 18 mining companies, three non-Chinese steelmakers and two trading platforms contributed to price reporting.
Fines accounted for around 80.3% of the observed Asian spot trades in the year, followed by lump at 15.2%, pellet at around 3.8% and concentrate at just short of 0.7%.
The volume of spot seaborne iron ore trades, observed by S&P Global, dipped 38% on the year to over 103.96 million mt in 2023.
The fall in seaborne trades concluded could be a reflection of fewer spot procurement of seaborne cargoes observed by individual steel mills, despite lower portside inventory levels seen through the year.
The average weekly portside inventory data in 2023 indicated levels were above 124 million mt, down from 140 million mt in 2022.
On the other hand, S&P Global observed 3,060 spot transactions for portside iron ore, a surge following the introduction of new port stock price assessments in 2023 including various brands of iron ore fines such as Super Special Fines and Fortescue Blend Fines, as well as Pilbara Blend Lump and Newman Blend Lump assessments. Fines accounted for almost 91% of the observed Chinese domestic spot trades in the year, lump trades accounted for around 55%, domestic concentrates and pellets at around 4%.
In 2023, low steel margins plagued the latter half of the year amid the high cost of iron ore and a dip in downstream demand. As such, demand for high Fe content fines such as 65% Fe Brazilian Carajas Fines fell sharply and the 65/62 spread dipped to a multi-year low, of $6.8/dmt on Sept. 13, 2023, the lowest since Aug. 6, 2020, S&P Global data showed.
During this period, S&P Global observed an uptick in the demand for lower Fe content fines such as SSF and FBF. The narrowing SSF/FBF monthly contracts discounts throughout the year also indicated the improving demand for low grade fines. The monthly discount for SSF was at 13.5% over the January average of Platts 62% Fe index, or IODEX, in January 2023, and at 6.5% over the December average of IODEX, in December 2023. Similarly, the monthly discount for FBF was at 8.5% over the January average of IODEX, on January 2023, and at 3.5% over the December average of IODEX, in December 2023.
Having kicked off the year at $117.65/dmt, Platts 62% Fe Iron Ore Index ended the year 44% higher at $140.50/dmt CFR China, S&P Global data showed.
Fixed price trades regain lost ground
As in recent years, the majority of spot trades reported were on a floating-price basis, as counterparties seek to mitigate price volatility that is part and parcel of trading cargoes for forward delivery periods, and as doing so permits hedging by using financial derivatives.
In 2023, fixed-price basis trades, however, edged up to 32% of the total number of trades reported, up from 25% in 2022 and 26% in 2021.
The proportion of floating-price trades has shrunk for the first time in four years, as some participants with a stronger risk appetite were heard to have done deals on a fixed-price basis, in attempts to lock in positions amid market conditions that they deemed to be favorable.