Global iron ore prices are currently at five and half month high. Prices rose over 35% from the lowest bottom at USD 37/MT, CFR China in Dec’15 to USD 50/MT, CFR China currently.
There are mixed sentiments in the market. Whether this rally will stay for long term or not. Few market participants says prices may not sustain long at such levels, as Chinese economic growth is still slow and Australia’s short supply hurdle will soon be resolved.
On the other side, few market analysts anticipates that prices would stay long for a month or two as China imports lesser quantity of iron ore in February month following January due to holidays.
Global iron Ore Prices are rising up on following grounds:
1. Chinese mine owners not resume production yet after holidays
Local mine owners in China did not resumes crude iron ore ore production yet after weeklong Lunar New Year holidays. Due to which, there is tight supply of iron ore to the mills. Since, Chinese mills resumed iron ore purchases and steel production after holidays, and due to tight supply of ore domestically, mills were completely rely on imported ore.
2. Short supply of iron ore from Australian to China
Australia, being the largest supplier of iron ore to China, cut down its supply to China by 10% by the end of Jan’16. This was because, Australia’s Port Hedland, the largest port exporting maximum iron ore was surrounded by Cyclone Stan, resulted in disruption of operations.
In Jan’16, exports from Port Hedland to China was registered a fall of 12% Y-o-Y at 26.5 MnT, which was 30.5 MnT in Jan’16. So, due to short supply from Australia as well less domestic production, there is shortage of ore in the Chinese market, leading to increase in prices.
3. Now is high time for construction
Post Chinese holidays, and with the arrival of construction season in China, steel mills showed interest for restocking raw material, as new demands emerges as well as resumes steel production. Currently, Shanghai rebar prices are also recorded at 5 months high at USD 291/MT. Also, to boost the slower economy, China govt. is cutting few transaction taxes for home buyers.
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