After a sharp increase in global iron ore prices starting of Aug’16, prices may either remain stable or may face correction in the coming term. Currently, global iron ore prices are hovering at USD 62/MT, CFR China.
Prices at such level were last seen in the month of April’16. Prices increased up to USD 7/MT in a month time. Although the sharp rise in global iron ore prices had given room for many trade activities such as Indian iron ore/pellet exporters concluded more deals due to high-profit margins, how long the market will remain on the higher node is a matter of concern.
Major important factors are still prevailing in China which may bring these higher level iron ore prices down or may keep them stable at the current level.
Let’s see what are the factors augmented that may either keep global iron ore prices stable or prices may face pressure:
1.Rising iron ore stockpiles at ports: Iron ore stockpiles at ports remained high. Till 12 Aug’16, iron ore stockpiles at Chinese ports was recorded at 107.4 MnT as per Chinese customs.
Iron ore stockpiles are highest since Dec’15 when it touched to a level of 100 MnT. Rising stockpiles may either pressure iron ore prices to remain stable or move down further.
2.Rising Chinese iron ore imports: In Jul’16, Chinese iron ore imports recorded at 88.6 MnT, highest in the year 2016. World’s top iron ore producer, Australia and Brazil is incorporating low-cost output into China, as a result kicking out Chinese domestic iron ore miners out from the market.
In 2015, China imported around 953 MnT iron ore, up by 2.2%. However, during Jan-Jul’16, Chinese imported are recorded at 583 MnT. In 2016, it is expected that Chinese imports will touch to a level of 1 BnT. This may pressure iron ore prices to move down in the coming term.
3. Production cut in Tangshan city: Production cut in Tangshan city by 50% on use of sinter as raw material had supported global iron ore prices to move up by certain extent. But, as mills are opting for pellets instead of sinter as raw material feed, demand for pellet increased in China, which may result in stable global iron ore prices.
4.Pellet premium hit all time high: Pellet premium had crossed to a level of 30/MT last week. Increasing demand of pellet in China due to restriction in usage of sinter may keep global iron ore iron ore prices stable.
Leave a Reply