China’s spot iron ore prices continued to weaken after the Golden Week holidays. The benchmark Fe 62% fines price move down by $2.30/t d-o-d to $94.20/t CFR China on 13 October which was the lowest in 2022 and at its one-year low too. The prices of iron ore fines dropped by 3.66% compared with that before the Golden Week holidays.
Factors driving down the prices
- The recent increase in Covid cases in China and lower-than-expected steel demand thereof, because of which prices of final products have varied.
- Most domestic steel mills recently reduced their inventories and thus their buying of iron ore. Recently, there were production restrictions in the Tangshan area due to environmental concerns. The Chinese government, in a decarbonisation drive, may set the production limit for blast furnaces from 14-22 October in Hebei. Plus, there is the global decline in crude steel production.
- As a result of the recent downturn in scrap prices, steel mills are preferring scrap over iron ore and have lowered the amount they add to the furnaces because of which purchasing has decreased. According to data, 4 blast furnaces are scheduled for maintenance among 126 from 25 large steel enterprises in Tangshan, with a total overhaul volume of 4,320 m3. This would impact the average daily molten iron output by 11,200 tonnes and production of the same will decline compare to 2.5 mnt during the Golden Week Holidays.
- Iron ore shipments at this time have reached a peak from the supply-side perspective. The entire volume of arrivals from 47 ports in China was 27.08 mnt, up 2.7 mnt m-o-m, while the total amount of iron ore shipments from 19 ports in Australia and Brazil were at 24.52 mnt from October 3 to 9, down 1.6 mnt.
The need for raw materials may continue to be low in the latter part of the year, and turn iron ore prices weak.
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