Chinese steel mills and traders will pay less for their imported iron ore in the near term, as demand for ore among the Chinese steel mills may soften with the slow recovery of finished steel demand, the China Iron & Steel Association (CISA) stated in its latest iron ore monthly market analysis released on March 9.
The imported iron ore price will trend downward. Most domestic steelmakers are cutting their production because steel demand from end-users has not sufficiently improved, since users only just started resuming operations from late February. This will affect the mills’ demand for iron ore, CISA stated in the report.
“Although the COVID-19 outbreak is coming under control (in China), controlling it completely still takes time,” it elaborated. “Thus, downstream industries consuming steel will still need time to fully recover. (Consequently) demand for steel will not be fully restored soon, and the growth in steel output will also slow down.”
A Tianjin-based iron ore trader in North China agreed that iron ore port prices may dip in the late March, because he expected that port stocks of ore would have accumulated significantly by that time. Not only should more ore carriers have arrived at port by then, but ore demand from mills is also stabilizing at a low level amid the high inventories of finished steel at their plants.
“The current high price of ore is mainly supported by the futures price,” he noted.
As of March 10, the most-traded iron ore futures contract on China’s Dalian Commodity Exchange (DCE) for May 2020 delivery rebounded further by another large margin, closing the daytime trading session at Yuan 662.5/dmt ($95.41/dmt), higher by 2.8% on week, and 13.9% on month, as reported. Meanwhile, Mysteel’s PORTDEX 62% Fe Australian iron ore fines price rose to Yuan 667/wmt FOT Qingdao including the 13% VAT at the same time, higher by 1.4% on week and 10.4% on month.
In the near term, iron ore supplies will be relatively sufficient to meet the demand, according to CISA, though as of February 28, imported iron ore stocks at China’s major ports had thinned slightly by 1.5% or 1.8 MnT on month to 122 MnT, said CISA quoting Mysteel’s data.
During February, Chinese steel output declined, with the daily steel output among the association’s 97 member mills reversing down by 5.4% on month to 1.9 MnT/day on average over February 1-20, according to CISA’s data.
Last month, the prices of both imported iron ore and domestically produced ore across China also reversed down. As of February 28, the 62% Fe content seaborne iron ore fines price had dipped by 8.9% on month to $85.1/dmt CFR Qingdao, while the price for locally produced 62% Fe content concentrates was lower by 0.7% on month at Yuan 706.73/t, CISA’s survey showed.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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