Global iron ore prices have reached to a level of USD 50.3/MT, CFR China. Prices have increased by around USD 7/MT post Chinese holidays. Currently, prices touched to a level of USD 50/MT, CFR China for the 1st time in last four months.
Iron ore prices bounced back after slumping to USD 37/MT, CFR China in Dec’15. Prices rose over 35% to USD 50/MT as compared to prices recorded new lowest level at USD 37/MT, CFR China in Dec’15.
Driving forces for increase in global iron ore prices
Chinese demand: Seasonal restocking by Chinese’s steel mills following recent Lunar New Year holiday, helped to increase demand of iron ore. Chinese steel production traditionally becomes little bit stronger in the month following Chinese New Year holidays.
Australia iron ore supply disruption: Major supplies from Australia to China have disrupted from mid Jan’16 due to weather disruption in Australia. Australia’s Port Hedland being the largest port exporting iron ore to China was surrounded by Cyclone named Stan over the new year. As a result, iron ore supplies from Australia were tight, supporting global iron ore prices.
Impact of Samarco disaster: Samarco mine in Brazil, jointly owned by BHP and Vale, has been shutdown since Nov’15 as the dam busted there. Due to some environmental disaster, supplies from Samarco region halted, leading to short supply of iron ore to China from Brazil.
Chinese steel production slows down: Due to overcapacity and weak steel demand in China, crude steel production in the nation is falling. The country registered crude steel production of 803 MnT in FY15; first fall in last 34 years. However, Chinese government in order to tackle with overcapacity problem, announced an annual steel production cut of 100-150 pa. Also, there are closure of some small mills due to high power and electricity costs. As a consequence, steel prices started stabilizing, supporting iron ore prices.
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