SWAPS REPORT: OTC iron ore traders sell prompts lower on fear of physical spot market toppling

Forward Curve (compiled from several brokers): 

February   $186/188 
March   $178/184 
April   $167/173 
Q2 ’11   $161/167 
Q3 ’11   $153/156 
Q4 ’11   $150/155 
Q1 ’12   $147/149 
2012   $143.5/145 

Fears of the physical spot iron ore market falling led OTC swaps market participants to sell off prompts at lower levels on Wednesday, brokers told MB. 

February settlements traded at $188 per tonne cfr Qingdao for 62% Fe content iron ore; down $1 from Tuesday and swaps tied to deliveries in March fell $1 as the prompt was exchanged at $184. 

Contracts for April settlement traded twice at $169; down $2.25 from the last trade on Monday and a Q2 ’11 prompt was sold at $165 compared to $166.5 on Friday.

There weremore offers than bids in the market on Wednesday as traders shied away from bidding the market up, brokers said. 

The Metal Bulletin Iron Ore Index (MBIO Index) calculated $190.69 per tonne cfr Qingdao on a 62% Fe basis on Wednesday; a fall of $0.18. 

Near to the close of the market, brokers said the backwardation was strengthening, with the March and April prompts priced over $10 apart. 

February settlements were bid at $186 and offered at $188, March was at $178/184, April was at $167/173 and Q2 ’11 was at $161/167. 

Swaps tied to deliveries in the third quarter of 2011 were bid at $153 and offered at $156, Q4 ’11 was at $150/155, Q1 ’12 was at $147/149 and the 2012 prompt was at $143.5/145.