3 April 2019
- Short-term supply conditions remain bullish. Tight forward supply remains in place, which along with smaller arrivals into China should support prices. Such a sharp decline in arrivals is due to the recent supply disruptions in Brazil and Australia which are filtering into the market. These levels are more significant than those seen during weeks 5-6 2019 when Cyclone Riley struck. Although restocking remains lackluster, the rates seem to have stabilized and spot supplies continue to tighten. We expect such weak restocking developments to be transitory as margins rise and mills typically step up production during this time of the year. However, there is still a risk of potential sintering curbs with pollution spikes.
- We see a further improvement in demand. Steel margins continue to improve and match October levels. As such, steel rates have improved which bodes well for IO demand. Our Domestic vs. Import Arb. remains bullish which continues to suggest a marginal preference for seaborne ore in the short-term. However, our Cash and Carry Arb continues to show near-term weakness.
- Short-term macroeconomic conditions are outright bullish. Downstream steel demand (manufacturing and construction) remains firm which should continue to support to steel prices and hence steel mills margins. Currency conditions strengthened as some weakness in the dollar continues to be picked up by our models. We picked up a marginal improvement in overall lending conditions which should also support short-medium term demand.