- Elevated inventories expected to cap price gains
- Traders’ sell-offs may accelerate post-holiday price decline
Mysteel Global: Prices for imported iron ore in China saw a modest increase last month, supported by mills’ restocking activities ahead of the Chinese New Year holiday in mid-February. However, with the seasonal restocking demand now fading and port inventories at an elevated level, ore prices are expected to decline this month, according to Mysteel’s latest monthly report on the commodity.
During January, though the Mysteel SEADEX 62% Australian Fines index first strengthened and then pulled back, the monthly average assessed by Mysteel was still higher at $106.1/dmt CFR Qingdao, up by $0.6/dmt last December’s $105.5/dmt.
The rise in prices occurred despite a significant expansion in supply, a delayed reflection of robust year-end shipments by global miners. By January 29, imported iron ore stockpiles at China’s 45 major ports tracked by Mysteel had surged 6.6% month-on-month to a record high of 170.2 million tonnes.
Price support in January stemmed primarily from active replenishment by steelmakers, the report pointed out. Despite reducing production during the seasonal low for steel demand, mills increased their ore purchases last month to secure sufficient raw material feeds ahead of the Chinese New Year break (February 15-23) when trading and logistics operations typically slow down.
For example, by January 29 the total inventories of imported iron ore in all forms – including those at mills, in transit, and at ports – held by the 247 Chinese steelmakers monitored by Mysteel had jumped 11.4% on month to reach a four-month high of 99.7 million tonnes.
However, market dynamics are shifting as February begins. “Many steelmakers have largely completed their pre-holiday restocking and have slowed their pace of purchasing,” the report indicated. Overall restocking is expected to become tepid after February 10, causing iron ore prices to lose momentum thereafter, though prices may find some temporary support before that date, it suggested.
On the supply side, iron ore shipments will slow this month due to seasonal factors, so China’s port stocks will continue accumulating but at a slower pace. While some blast furnaces are scheduled to resume operation this month, resulting in a slight recovery in steel production, the persistently high port inventories are expected to cap any significant increases in iron ore prices, the report argued.
Moreover, with the restocking drive subsiding, traders may begin selling off their cargoes to ease the pressure of elevated stocks, it added. Should this occur, it would exert additional downward pressure on ore prices.
In summary, Mysteel’s report predicts that imported iron ore prices in China will retreat this month as pre-holiday restocking fades, with the rate of decline possibly accelerating after the CNY holiday from the substantial overhang of portside inventories.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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