- Operations at many BFs expected to resume
- Port stocks, import arrivals likely to decline
Mysteel Global: Chinese steelmakers are expected to increase their purchases of iron ore in the coming weeks to rebuild stocks they had depleted during this year’s Chinese New Year (CNY) holidays that ended on 4 February, Mysteel notes in its latest monthly report on the commodity.
The strong demand for ore, coupled with a decline in the volumes of imported iron ore arriving this month, will likely lift China’s iron ore prices, Mysteel predicts.
Last month, Chinese prices of imported iron ore had initially weakened because of low steel demand in winter but recovered from the middle of the month after some mills brought idled blast furnaces (BFs) back on stream after completing annual maintenance.
“Besides mills resuming production after overhauls, pre-holiday restocking of raw materials also lent some support to iron ore prices late last month,” a Shanghai-based iron ore analyst said. Traders and logistics firms generally close their offices for the CNY celebrations, so mills must stock up on feed materials beforehand to avoid shortages during the break, as Mysteel Global reported.
On 8 January, the Mysteel SEADEX 62% Australian Fines index was at $96.6/dry metric tonne (dmt) but by 31 January, it had climbed up to $104/dmt, making for a small increase of $3.4/dmt m-o-m.
This month, the fundamentals for China’s iron ore market are expected to strengthen, underpinning ore prices. On the supply side, arrivals of imported ore at the ports are likely to decline, Mysteel’s tracking of global iron ore shipments suggests.
On a daily basis in January, the volume of iron ore shipped globally by ore miners averaged 3.88 million tonnes (mnt), down by 470,000 tonnes (t) from the previous month due to weather disruptions.
Meanwhile, China’s iron ore demand is set to recover going forward, as many mills resumed operating their overhauled BFs from mid-January, and more are intending to do so this month.
Mysteel’s latest survey findings show that six BFs with a total pig iron capacity of 40,500 t/day are scheduled to be taken offline for maintenance this month, while 12 BFs will be relit, adding 50,800 t/d to the operating capacity.
In view of the survey results, Mysteel estimates that daily hot metal output among the 247 mills it tracks nationwide will rise by 1.2% m-o-m to 2.28 mnt/day this month. Moreover, average output could top 2.29 mnt/d, industry watchers suggest, arguing that the healthy profit margins being enjoyed by mills currently could motivate them to produce more if the positive margins continue.
Robust demand for iron ore among mills to support higher production also means that they are likely to be active in hauling ore cargoes from ports this month, especially those makers that consumed large quantities of in-plant ore stocks during the holidays and are rushing to rebuild.
As a result, imported iron ore stocks at China’s 45 major ports under Mysteel’s survey will decline this month, the report suggests. The volume stood at 153.7 mnt on 4 February, higher by 4.3 mnt or 2.9% from the pre-holiday level, according to Mysteel’s latest survey results.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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