Asian iron ore prices are volatile. After 4 consecutive gaining sessions, the last session’s price reversed to decrease as China’s steel demand fell due to unfavorable weather and the government of this country continuously introduced intervention measures to cool down metal prices.
At the end of the last session (June 29), the reference iron ore futures price (September 2021) traded on the Dalian bourse fell 2.7% compared to the previous session, to 1,153 yuan (178) ,57 USD)/ton. This is the first losing session after 4 consecutive gaining sessions.
Iron ore futures in July – the most traded contract – on the Singapore floor this session also fell 2.3% to 207.75 USD/ton.
Consulting firm Mysteel, a Chinese data provider, said the price drop was due to weak demand for construction materials. Meanwhile, Sinosteel Futures analysts said ferrous alloy trading was also affected by steel mills being ordered to limit or suspend operations to minimize smog during the 100th anniversary celebrations. Communist Party of China.
The downward price trend also took place in the scrap steel market. Mysteel data shows that scrap steel prices in China for the week of June 18-25, 2021 also turned down to CNY 14.9 (US$2.3)/ton from the previous week, to CNY 3,700.8/ton ( VAT included).
Prices of iron ore in China (spot contract, USD/ton)
The daily trading volume of construction steel in this market, including wire rod and bar-in-coil, by 237 Chinese traders surveyed by Mysteel showed a decrease. 17,608 tons down to 193,481 tons on June 29 due to hot and humid weather.
Iron ore liquidity on the Dalian exchange is currently 15.1% lower than the same period last year, after China’s market watchdogs reiterated warnings against speculative hoarding.
Although Chinese steel mills are slowing down their purchases of iron ore as construction and manufacturing activities are in the low season, the decrease in ore inventories at seaports has raised concerns about the risk of shortages supply will continue.
Atilla Widnell, managing director of Navigate Commodities in Singapore, said: “Iron ore exports from Australia in June were disappointing, causing the global supply-demand balance to tighten again, not to mention a few other fluctuations. try in Brazil”.
Australia and Brazil are the world’s largest iron ore producers. Brazilian supply remains constrained by operational restrictions on ore mines due to safety concerns.
In the current market environment with mixed factors, Howie Lee, economist at OCBC Bank in Singapore, said: “Price (iron ore) in the next 6 months could fall due to the intervention. However, it is not excluded that the price (iron ore) will skyrocket to 250 USD/ton as Chinese customers seek to replenish their inventories for depleted warehouses of the Chinese government. myself”.
In fact, the price of iron ore with 62% content of imported spot at Chinese seaports has remained above 200 USD/ton during the past 4 weeks, despite the efforts of the Chinese Government to cool down prices.
Correlation between iron ore inventory at Chinese seaports and spot iron ore prices
Regarding the short-term iron and steel price outlook, market analyst Fitch Solutions said: “Iron ore prices still have a bullish basis amid strong demand from the steel sector and supply problems of manufacturers. big in the world”.
However, Fitch also noted that the improvement in supply and consumption of the downstream sector, due to high prices, will prevent strong price increases in the near term.
In the context that China’s iron and steel industry still has a lot of room for development, China’s Baowu Group, the world’s leading steel producer, recently said it will cooperate with Vale and Shandong Xinhai Technology to produce production. stainless steel raw material nickel cast iron (NPI) in Indonesia.
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