Iron ore prices recover by 4% this week in spite of steady steel prices.
Spot iron ore prices recovered by 4% this week. Fe 62% Australian fines prices were seen at USD 59/MT CFR, China. Prices rose nearly to a 2-month high and were last seen at such levels on 1st July’15.
After a production cut on commemoration of 70th anniversary of world war 2, Chinese mills have started production. Mills have started buying iron ore as they are willing to ramp up production.
Prices moved up on expectation of a seasonal pick up. Usually, in Sept-Oct’15 prices move up as construction activity starts.
In addition, Chinese steel prices remained almost steady this week, but mills have already started production hoping consumption may recover from this month.
Impact of less iron ore imports last month
Last month, the country imported 14% less iron ore due to various factors, like explosion at Tianjin Port and oversupply by major iron ore producers in the market. Due to lesser imports last month, there is less availability of iron ore this month at ports which lifted spot iron ore prices.
Market analysts anticipate that China’s weak steel production and demand may further cut iron ore imports in the upcoming months. Further, low cost iron ore supply from Australia and Brazil may replace high cost iron ore supply in China, which may also bring import figures down.
In line with less imports in coming term, spot iron ore prices may gain further due to limited availability of iron ore.
Steel export gears up; unlikely to go much
Steel export from China continues to increase as mills still opt for over production of steel. Inspite of current weak demand and slow economic growth, mills prefer to produce more steel due ample and cheap availability of ore.
Slow steel demand in China has increased opportunity for exports until now. But export in the coming term will be difficult to increase due to strict environmental norms imposed by Chinese govt.
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