Global iron ore prices have witnessed a lot of ups and down in Dec’15. Starting Dec’15, prices touched to a level of USD 37/MT, CFR China (all time low), geared up somewhat from mid Dec’15, finally ended at USD 42.5/MT on 31 Dec’15.
First half of Dec’15 turned out to be downturn. Prices during that time remained down due to bearish sentiments surrounding whole iron ore market. However, during second half, prices somewhat recovered owing to upcoming New year holidays as well as short term hike in Chinese steel prices.
Market drivers of the month
1.Iron ore market in China is still cold. Increase in prices is temporary as few more major factors like oversupply and weak steel demand may pull down prices further.
2. Australia’s Gina Rinehart’s Roy Hill project shipped its first shipment jointly owned by Hancock Prospecting, Japan’s Marubeni and China Steel Corporation, exported to Posco steel mills in South Korea. Roy Hill will add 55 MnT of high grade iron ore to the existence capacity and has long term contracts with steel mills in Asia including Japan for supplying 90% of production.
3. Shanghai rebar, a most active steel product produced by China, touched an all time low. However in second half of Dec’15, prices have moved up by USD 2/MT within a week.
4. Keeping steel demand in mind, Baoshan Iron & Steel, China’s largest steelmaker, had rollover steel products prices for Jan’16 shipments. The company’s pricing policy usually reflects the mood of Chinese steel industry as it is considered as a benchmark in terms of pricing policy.
5. Some unprofitable Chinese mills have cut their steel production. On the other hand, in Beijing, the government had forcefully shutdown the plants to fight against pollution smog. These factors supported steel prices, especially rebar prices in China to rebound.
6. Iron ore inventories in China have increased as compared to Nov’15. On 25 Dec’15, inventory at major Chinese ports was recorded at 95.7 MnT, which was highest since May’15.
7. China’s steel exports contributed to be 100 MnT in the 1st eleven months of 2015 as steel producers shipped more steel products to overseas market. If China’s steel export growth slows down due to lack of trade, a glut of steel in China can harm domestic steel prices to move down further.
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