Global iron ore prices have bounced back to USD 51.6/MT on 02 Mar’16. Prices reached these level after a gap of eight months as they were lastly seen at USD 50/MT in Sep’16. Currently, Shanghai rebar prices are at 6-month high at USD 306/MT.
Upon seasonal pickup in construction activity, steel producers started purchasing raw material, boosting iron ore demand in China. On the other hand, inline with improved steel demand and steel prices there is also rise in iron ore prices. Few mills in Tangshan have restarted their blast furnace that they had put under maintenance as started making some profits.
In addition, to boost economic growth, Chinese bankers have reduced some transaction taxes and also lowered the amount of deposits bank hold. As a result of which, transactions will increase and weak Chinese economy will find a support.
It is expected that supply from Australia and Brazil will increase in March 2016 to China as the freight rates are low and port disruptions in both the countries were being addressed.This could continue to keep the iron ore prices in early USD 50s.
China’s measure to reduce overcapacity and announcement of production cut by 100-150 pa could also support prices and prices may get sustainable in future. On restricting steel production capacity, steel demand will get stabilize, upon which iron ore prices will get some support.
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