China’s imported iron ore price will probably persist high for the rest of 2021 though may not stay above $200/dmt all the time, and the price will remain firm in the medium-term with the country’s strong steel demand, guest speakers agreed at a panel discussion on July 13, as part of SGX’s three-day Singapore International Ferrous Week event over July 13-15.
“If we look ahead for the next 12 months, I don’t think we will see a collapse in iron ore price. I think iron ore price above $200/tonne is unsustainable, but we are likely to see it stay at around $150/t over the period, a level which is still extraordinarily high by historical standards,” Rohan Kendall, head of iron ore research, Wood Mackenzie, shared at the panel.
China’s iron ore demand will remain strong in line with solid steel demand and high steel production when the country’s construction activities are largely supported by demographic features, while iron ore supply is unlike to increase remarkably in the medium-term, as Australian miners have almost maximized their infrastructure availability and Vale still faces challenges in bringing back its production from the dam accident, he elaborated.
As for the prospect of China’s steel market for the rest of 2021, panellists agreed on high steel demand and thus most likely higher steel output on year for the whole 2021 despite Beijing’s vow to bring down the steel output on year.
“Steel production will soften in the second half of this year…but for 2021 as a whole, China will produce more steel than last year,” Kendall said, adding, “the Chinese government may come up with some supply-side policies, trying to cool steel production, but ultimately steel demand is still being stimulated…so high steel prices will continue to encourage steel production…and iron ore price will be high as a result.”
China’s steel demand will certainly stay high, and so long as steel mills’ profitability remains decent, it will be rather difficult for the government to monitor all the steel mills about their steel output given the huge number of mills in China, Zhuang Binjun, an industry expert echoed.
Firm steel demand, thus, will prevent iron ore price from being affected seriously by Beijing’s unwavering surveillance on high commodity prices including steel, and it has been proven to be the case in late May when imported iron ore price had been modestly impacted despite slumps in China’s domestic steel prices, the panellists agreed.
Erik Hedborg, principal analyst of CRU also pointed out at the panel discussion that speculation in the iron ore market may increase the price volatility but will not push it to high levels unless there is strong support from the fundamentals, which is the case for now, and the price will persist high until steel demand is softened.
Meanwhile, some miners may be concerned about the sustainability of the high iron ore price, but the existing pricing mechanism and the COVID-19 situation will both prevent the price from decreasing much, according to Zhuang.
Mysteel SEADEX 62% Australian Fines had been persisting high at $149.55- 233.7/dmt CFR Qingdao since the start of this year until July 14, which was far higher than the $79.9-112/dmt CFR Qingdao a year ago.
Written by Lea Li, liye@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint Research.
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