Global iron ore prices have bounced back to USD 51.6/MT. Prices reached these level after a gap of eight months as they were lastly seen at USD 50/MT in Sep’16.
Starting Feb’16, prices were witnessed at USD 44/MT, CFR China and by the end of Feb’16, prices were up by USD 8/MT and reached at 52/MT, CFR China.
Currently, the global market have become optimistic as iron ore and steel demand in China may improve upon improved construction activity after winter. Still, there is merely expectations, that weather this price rally will sustained as there is a factor underlying named “The Global Glut” by major miners will pressurize the iron ore prices in future. Alongside, market analysts anticipates that this price rally wouldn’t last long, as is still oversupplied market.
Market drives of the month
1. Post Chinese Lunar New Year holidays there was pickup in the market. There was sudden increase of USD 8/MT in a month time.
Major reasons for rise in prices were:
a. Chinese demand: Seasonal restocking by Chinese’s steel mills followed by Lunar New Year holiday, helped to increase demand of iron ore. Chinese steel production traditionally becomes little bit stronger in the February month.
b. Australia iron ore supply disruption: Major supplies from Australia to China have disrupted from mid Jan’16 due to weather disruption in Australia. Australia’s Port Hedland exporting iron ore to China was surrounded by Cyclone named Stan over the new year. As a result, iron ore supplies from Australia were tight, supporting global iron ore prices.
c.Impact of Samarco disaster: Samarco mine in Brazil, jointly owned by BHP and Vale, has been shutdown since Nov’15 as the dam busted there. Due to some environmental disaster, supplies from Samarco region halted, leading to short supply of iron ore to China from Brazil.
d. Its 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. Also, to boost the slower economy, China govt. is cutting few transaction taxes for home buyers.
2. The well known Vale released its annual iron ore production output. The miner records highest i.e. 345.9 MnT iron ore production in 2015 and aims to increase it further in 2016.
3. Iron ore inventories at major Chinese Port was recorded at 97.3 MnT (as on 29 Feb’16).
4. Shanghai rebar prices are at 6-month high at USD 306/MT. Upon seasonal pickup in construction activity, steel producers started purchasing raw material, boosting iron ore demand in China. On the other hand, inline with improved steel demand and steel prices there is also rise in iron ore prices.
5. Chinese government announces a production cut in its crude steel production by 100-150 MnT in coming five years. On restricting steel production capacity, steel demand will get stabilize in future.
6. To boost economic growth, Chinese bankers have reduced some transaction taxes and also lowered the amount of deposits bank hold. As a result of which, transactions will increase and weak Chinese economy will find a support.
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