The iron ore market in China is characterised by moderate post-holiday demand. Overall, an increase in the supply of this raw material is forecast for the fourth quarter, which will put downward pressure on prices.
According to Kallanish, the price of ore (KORE 62% Fe/Qingdao) stood at $91.31/t CFR as at 12 October, which was 1.9% lower than at the start of the month (2 October). On 13 October, it fell to $90.6/t CFR.
Prices for imported iron ore in China fell overall immediately after the holidays, between 8 and 10 October, as indicated by data from the latest Mysteel Global survey, as trading activity recovered only moderately.
Although the steel plants mainly drew on their own ore stocks during the seven-day break, demand for replenishment after the holidays was not particularly high — market sources note that most plants purchased only the volumes necessary to meet their immediate production needs.
Trading volumes of imported ore at ports over these three days (approximately 609,000 tonnes per day) were 32.2% lower than last year during the first week following the national holiday. Steel plants’ interest in purchasing raw materials has declined due to negative margins on the sale of steel products. Furthermore, there is an oversupply in the market owing to stable supply volumes from Brazil and Australia.
At the start of this week, iron ore prices were buoyed by the expected resumption of purchases by Chinese steelmakers. However, the low profit margins at steelworks and the forecast increase in supply in the fourth quarter (major mining companies are ramping up shipments to meet their annual targets) are limiting the potential for growth.
Analysts at Yongan Futures Co., whose recent report is cited byBloomberg, point out that iron ore prices are likely to move away from being influenced by the combination of high steel production volumes and support from freight rates, and will in future be determined by factors such as rising supply, weakening demand and stockpiling. They expect prices to trend downwards in the fourth quarter.
It should be noted that, at the end of September, iron ore prices fell back to below $100/t. Market sentiment in the second half of last month was influenced by renewed calls for production cuts in the steel industry and weak fundamentals at steelworks. Buyers had largely completed their pre-holiday restocking.
