What lies beyond the critical fall of iron ore prices?
During the Chinese New Year holiday (Feb.18-24), prices for 62 percent Fe content iron ore for China have moved on a stable trend at $63-64/mt CFR Qingdao port, since Chinese steel producers have been on their vacation. Global steel markets have been wondering how iron ore and steel prices would be revised and determine the market situation after the Chinese market players return their holiday. Looking at previous years, steel demand in the local Chinese market has generally increased after the Chinese New Year holiday. It was expected that Chinese steel demand will also increase after this year’s holiday and provide support for iron ore prices. On contrary with this expectation, import iron ore prices have began the New Year with slight softening in China. 62 percent Fe content iron ore prices in China have declined below the $60/mt CFR threshold, to their lowest level in approximately six years at $59.75/mt CFR. While this situation has come as a big surprise to the market, today, import iron ore prices in China have decreased further by a small margin to $59.5/mt CFR.
In March 5, speaking at the opening session of the National People’s Congress, the annual meeting of parliament, China’s premier Li Keqiang has announced China’s national growth target as seven percent, the lowest level as of 2009, due to misuse of authority, increasing debts and environmental pollution. While reflecting the economic contraction in China once again, the announcement is thought to be the main reason for the sharp decrease in iron ore prices in the country. Also, as of the start of 2015, the Chinese government has put a series of more strict environmental protection laws into action and some of the steel mills had to restrict their production due to these laws. Since premier Li Keqiang has also underlined that more environmental protection measures will be applied, more Chinese steel mills are under threat of being restricted in the coming days. The environmental measures in question may be considered a a step in order to ease the oversupply problem in Chinese steel market and it is certain that this situation will support the downtrend in imported iron ore prices in the country.