The official end of the eight-day Chinese New Year (CNY) holiday on February 18 may cause prices in China’s imported iron ore market to rise in response to post-holiday restocking activity among steel mills and traders, market sources indicated.
The inventories of imported iron ore piled at most domestic steelmakers’ works shrank by a large degree during the CNY holiday as the makers had to draw down their internal feedstocks, Mysteel Global noted.
Most mills ceased iron ore procurement at China’s portside and seaborne markets during the holiday, primarily because traders had shut their businesses to enjoy the break, a Shanghai-based market watcher observed, while most mills’ blast furnaces kept operating steadily.
China’s seaborne iron ore prices remained unchanged during the holiday due to limited trading activity during the period, with Mysteel SEADEX 62% Australian Fines index still sitting at $126.6/dmt CFR Qingdao on February 16, unchanged since the last working day before the CNY break.
Although demand for ore replenishment among mills and traders during the coming week will serve to support the country’s iron ore prices, such support may not be so strong, the Shanghai source warned.
Considering the poor steel margins that most mills are currently enduring, their restocking of raw materials including iron ore will be cautious and the quantities small rather than large, the source added.
In fact, before this year’s CNY holiday, many steelmakers had built up their internal ore stocks prudently and at a slow pace, causing the prices of imported iron ore to face some downward pressure during that period, as reported.
For example, on February 9 Mysteel SEADEX 62% Australian Fines index logged $126.6/dmt CFR Qingdao, some $9.45/dmt lower than two weeks earlier.
Looking longer-term, once the steel mills conclude their post-holiday ore replenishment, the trend in iron ore prices will be determined by the rate at which mills resume their production, Mysteel Global noted from market sources.
Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.