China’s imported iron ore price for seaborne cargoes will reach a high of over USD 90/dmt CFR in the first half of 2020 before retreating afterwards, according to discussion panelists the Mysteel Bulk Commodities Week 2020 Iron Ore Seminar in Shanghai on December 13. The reasoning was that supplies of domestic and imported iron ore will be both experience tightness during the coming January-June half – albeit temporary – just when Chinese steel mills have urgent demand for restocking.
“Iron ore shipments from many overseas miners in first quarter are normally low,” Shi Sheng, a trader with Hangzhou CIEC Group in Hangzhou in Southeast China, stated in the panel. Every year usually between January and March, Brazil and Australia both experience bad weather in the form of heavy rains or tropical cyclones, which disrupt both mining and shipping operations, Mysteel Global notes.
For instance, this year, shipments from Australia were disrupted over late March-early April after Cyclone Veronica lashed Western Australia’s Pilbara region and forced ore carriers to anchor offshore to wait out the gales, as Mysteel Global reported. In Brazil, heavy wet-season rains in North Brazil compounded the impact of the suspension at some of Vale’s mining operations after the tailings dam collapse in January, which also resulted in fewer iron ore shipments from Brazil for several months.
Cui Qin, a senior ferrous-industry analyst for Chaos Investment in Shanghai anticipated that supplies of imported iron ore in first half of 2020 will be tight, arguing that those mining companies that suffered decreases in output and shipping volume this year could struggle to increase their production or shipments in 2020, especially Vale. “After all, the miners have to consider many factors, including life-span of mines and production cost,” she explained.
Meng Xiaofeng, a procurement official with Jianbang Steel in North China’s Shanxi province, maintained that production of domestic iron ore concentrates will also be short over the coming January-March period, as most miners and beneficiation plants normally suspend operations to observe the Chinese New Year (CNY) holiday which next year will begin on January 25 and end on January 30. Lower winter temperatures also prompt some mines, especially those in North and Northeast China, to cease operating as water in their plants freezes.
In the panel discussion, Meng emphasized that next year, the suspensions of mining operations in Shanxi are relatively long compared to elsewhere in China. “Miners may not resume until late February, based on my past experience,” he added.
On the other hand, demand for iron ore among steelmakers for restocking is generally high in first three months of year, the mill official said. While miners, trading companies and logistics firms usually halt all work for the holidays, steelmakers tend to operate a skeleton staff and keep their blast furnaces and steelmaking shops operating normally during the Spring Festival.
After surviving on their own internal stocks of ore during the CNY holiday, steelmakers will have urgent need for replenishment once China reopens for business after the break, Meng explained. Moreover, next year will likely see the commissioning of new upstream steelmaking facilities – constructed after other upstream capacity was idled and scrapped in recent years – which will generate new demand for raw materials, he pointed out.
As of December 13, Mysteel’s price for imported iron ore remained largely stable at a relatively high level, with that for the seaborne iron ore index reaching USD 94.2/dmt CFR Qingdao.
This article has been published under article exchange agreement between Mysteel Global and SteelMint.
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