Chinese spot iron ore fines prices increased sharply this week amid robust Chinese demand after rains and hike in futures. The prices as on 4th Aug’20 was assessed at $ 118/t, CFR China. The global iron ore prices observed at $ 116.35/t,CFR China in the beginning of the week, up sharply against $ 111.45/t,CFR China last week closing.
The prices are hovering at one year high levels as the same were witnessed towards the end of July’19 at $ 118/t, CFR China.
The rise in price is attributed to rising Chinese demand amid resumption post end of the rainy season towards Southern China and deficiency of medium grade fines. Few Chinese mills have reportedly resumed operations after last month’s disruptions caused by floods.
Brazil has the second worst coronavirus outbreak in the world. Hence with rising infections, it becomes uncertain whether Vale will be able to increase output in the second half of the year, further raising concerns over raw material availability. Also in its quarterly results, Vale mentioned that it’s guidance for iron ore fines production in 2020 remains unchanged, at 310-330 mn t, assuming the lower end of the guidance as the most likely scenario.
The most active iron ore contract for Sept’20 delivery jumped to RMB 890/t yesterday compared to RMB 820/t on 28 Jul’20.
However few market participants are skeptical regarding sustainability of the hike. Although market fundamentals are strong, it’s still doubtful how far this price rally will continue.
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