In Apr’16, global iron ore market remained on higher node. Positive sentiments prevailed in global market, led to rise in global iron ore prices by USD 11/MT M-o-M.
Starting 2016, prices were witnessed at level of USD 43/MT, CFR China and now they touched to a level of USD 65/MT, CFR China within 3 months of time, followed an uptrend of around 64%.
Market drivers of the month
1. Starting Apr’16, global iron ore prices are assessed at around USD 54/MT, CFR China on 01 Apr’16 and finally touched to a level of USD 65/MT, CFR China on 29th Apr’16.
2. The rapid price gain has defined the supply-demand fundamentals of iron ore. Steel , including iron ore prices picked up significantly in Apr’16. This was due to seasonal pick up in construction activities and to lower-than-usual inventories, following a reduction in steel production last year.
3. Sharp surge in Chinese spot steel prices has drifted global iron ore prices. Chinese billet and Shanghai rebar prices moved up abnormally in Apr’16. Tighter supplies following plant shutdown last year, restocking by consumers and pick up in seasonal demand has combined to lift steel prices in China.
4. Chinese spot billet prices moved up by USD 73/MT in a month time. On 1 Apr’16, spot billet prices were witnessed at RMB 2,010/MT (USD 309/MT) and by the end of the month,prices touched to a level of RMB 2,490/MT (USD 383/MT). Shanghai rebar prices too moved up significantly.
5. Due to International Horticulture Exposition in Tangshan, Chinese government has announced a production cut between Apr’16 and May’16. Because of this, Chinese steel makers had started producing steel and restocking it. In coming days, there will be production cut of around 50% by steel mills in Tangshan.
6. China‘s crude iron ore production also fell by 6% in Jan-Feb’16, amounting to 161 MnT, which was 172 MnT in the same period a year before. In Mar’16, China produced 98.1 MnT crude iron ore, which fell by 5% from a year ago. Total iron ore production was 261.5 MnT in Q1 in F16, down by 14.6 MnT or 5.3% from a year ago.
7. As domestic iron ore availability was less, the emerging steel demand has to rely on imports. However, Chinese iron ore import increased by 8% M-o-M in Mar’16 as restocking of material by steel mills led to iron ore price rally.
8. Iron ore import is likely to remain high for the next 3 months as major miner namely Australia will ship more iron ore to China in order to meet its financial ending target by the end of June.
9. Iron ore inventories at major Chinese Port were recorded at 98.6 MnT (as on 22 Apr’16).
10. Meanwhile, world’s top miners namely BHP Billiton and Vale had announced revised production guidance for 2016. It appears that the supply cut announced for this year by BHP (by 10 MnT) and Vale (by 10 MnT) is enough to give a support to iron ore prices.
11. By looking towards the current demand-supply fundamentals, it is likely that global iron ore prices will touch to a level of USD 55-56/MT in the coming term. Market analysts still anticipate that there is a risk of a bigger correction in the coming time. There is still doubt, this rapid increase in iron ore price will sustain.
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