Seaborne iron ore prices and Chinese steel futures prices gained in tandem on Thursday after a massive explosion at Tianjin port raise concerns over supply. The impact may be real but short-lived, with iron ore expected to slide as steel production cuts increase over the coming weeks.

The Kallanish index for 62% Fe Australian fines jumped $1.64/t on Thursday to $54.76/dry metric tonne cfr Qingdao. Two fixed price cargos of PB fines traded on GlobalOre for September delivery, 170,000t at $57/t cfr Qingdao and 170,000t at $56.5/t.

The January 2016 rebar contract on the Shanghai Futures Exchange closed up CNY 31/t at CNY 2,092/t ($330/t), while the same contract for hot rolled coil closed up CNY 25/t at 2,094/t.

The core impact of the explosion in Tianjin port is on the flow of iron ore to northern Chinese steelmakers. Disruptions are not expected to last more than a couple of days, meaning mills have the stocks to maintain production at current levels. They are turning to spot cargos and stocks from other ports to top up their disrupted supply however, helping to push up prices.

The devaluation of the CNY earlier in the week has also had a positive impact on sentiment. The potential for another export surge as a result has boosted hopes that iron ore demand will be stronger than expected. Another surge seems unlikely considering the high level of exports currently but the lower exchange rate does mean an expected slowdown in exports later this year could be smaller than expected.

The impact on domestic Chinese steel prices is likely to be minimal, as many exporters have already cut their USD prices to account for the change. Iron ore prices are also more expensive in CNY terms, which should add to pressure to lower USD prices.