Global iron ore prices have hit again 2- weeks low. On 11 Jan’16, prices are assessed at USD 40.9/MT, CFR China. Prices are again declining downwards after a sudden pick up at the end of Dec’15, due to pre-stocking of the raw material by Chinese steel mills before a week long Lunar New Year last week.
China is facing worst time starting 2015, due to overall dull iron ore demand and weak steel consumption. As of now, iron ore demand in China is not picking up. But, traders are still positive that demand may improve by the end of February. Country’s major steel producing province, Hebei, has pledged to cut steel production by around 8 MnT this year in-order to address overcapacity and control air pollution.
Currently, Chinese steel mills have limited the restocking at mills as there was unlikely enough restocking activity done prior week-long Lunar New Year last week.
The ongoing production cut by Chinese steel mills will definitely curb further iron ore demand for iron ore in the near term. On the other hand, there is continuous influx of imported iron ore into China. Chinese major port have recorded around 95 MnT iron ore till Dec end, highest since May.
Rising iron ore exports from major iron ore exporters namely Australia, Brazil etc and declining demand in China due to slower economy, will most probably impact iron ore prices in coming months. Apparently, Market Analysts anticipates that the prices will touch to a level of USD 30/MT, due to strong iron ore supplies by those countries.
Devaluated Yuan causing un-viablility for Indian exports
Since last one year, Indian exports have been witnessed a decline on slowdown in global demand. As mentioned above, China, on slow economic growth, is whole surrounded with bearish sentiments unlikely to keep hope for any improvement.
Meanwhile, Chinese currency is also suddenly weakens last week (exchange rate: 1 USD=6.58 RMB). This depreciated currency will make Indian exports expensive to China. Since long back, due to weaken global demand and China’s slow economic growth, Indian exports were hard to find to way, now devaluated yuan will be one the additional factor for un-viability of Indian exports.
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