China's iron ore importers need to keep a close eye on the country's steel mills as they mull output cuts and shutdowns amid a year-end credit crunch, the China Iron and Steel Association said Thursday.
Prices of iron ore derivatives including futures, swaps and options have seen signs of recovery recently due to expectations of a better 2016 for China's steel sector, but the situation was unpredictable, CISA said in its latest iron ore monthly report.
Importers need to be "alert to price volatility with possible steel production cuts or halts, or retrenchments among Chinese mills, in the near term, with their failure to secure financing or credit issuance from banks towards the year end," CISA said in the report.
Iron ore imports in December are expected to be lower than in November due to tightening cash flow at most Chinese steel mills, market sources said. Platts IODEX fell below $40/dry mt CFR North China December 4 for the first time since assessments began in 2008, and hit a new record low at $38.50/dmt Tuesday, before edging up 65 cents/dmt to $39.15/dry mt CFR North China Wednesday.
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