China’s iron ore market is likely to see the supply-demand balance ease slightly this month but remain relatively tight nonetheless, according to Mysteel’s latest monthly report released on January 6. Any substantial drop in iron ore prices is also hard to imagine, it said.
Regarding iron ore supply this month, new iron ore shipment volumes arriving at Chinese ports in January are expected to be flat compared to last December’s result, the report said, given that major iron ore miners in Australia and Brazil might slow their rate of ore shipments after meeting their annual or semi-annual targets.
However, the severe cold weather impacting northern and eastern China currently including snow and wind might also affect port operations, especially the berthing and unloading of vessels from time to time, which in turn could reduce iron ore volumes flowing into the market.
For domestic iron ore concentrates supply, output is seen declining further due to the cold weather, especially in northern China, and due to some miners’ planned stoppages for maintenance, the report also noted.
As for ore demand, currently most Chinese domestic steel mills continue to keep their output high, but for the rest of this month, some mills have scheduled maintenance stoppages. Some mills also have plans to cease operating some old blast furnaces involved in steel capacity-swap projects. Thus, Mysteel expects that the molten iron output overall is likely to remain flat with the volume in December 2020 or ebb slightly.
However, with the Chinese New Year holiday over February 11-17 approaching, most domestic mills have the need to accumulate additional inventory prior to the holiday to ensure they can operate smoothly during that period, given that transportation of raw materials including iron ore is normally disrupted. Consequently, iron ore demand – especially for port inventories – is forecast to be firm for the current month.
In sum, China’s iron ore market might continue to see a relatively tight supply-demand balance over the coming few weeks. Iron ore port stocks are unlikely to increase to any great extent, which may lend support to current iron ore prices, Mysteel remarked in the report. However, as ore prices have been at multi-year highs of late, the risk of a retreat does exist, it also warned.
During last December, Mysteel’s PORTDEX 62% Fe Australian Fines index averaged Yuan 1,046.4/wmt ($161.5/wmt) FOT Qingdao and including the 13% VAT, surging by Yuan 163.8/wmt on month, while the SEADEX 62% Fe Australian Fines index averaged $155.75/dmt CFR Qingdao, up by an even higher $31.62/dmt on month.
By the last week of 2020 over December 25-31, blast furnace capacity utilization among the 247 Chinese steel mills Mysteel canvasses weekly remained at a relatively high level of 92.08%.
By December 31, the total of imported iron ore stocks at China’s 45 ports stood at 124.2 million tonnes, down 306,500 tonnes from the volume as of December 3. As of the same day, the inventories of imported iron ore at the 247 steelmakers nationwide were equal to 114.65 million tonnes, up 228,000 tonnes from the volume on December 3, according to Mysteel’s data.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
Leave a Reply