Little wiggle room for imported ore prices in China

Little wiggle room for imported ore prices in China

The continual climb of domestic construction steel prices has pushed up the spot price of imported iron ore in China; however, an unwillingness on the part of the mills to purchase ore for the sake of hoarding, as had happened in previous years, may leave little room for further rises in imported iron ore prices. Although iron ore transactions have picked up in recent days, iron ore prices have not risen accordingly due to high inventories at ports. Perhaps having taken valuable lessons from the blind hoarding that had been all the rage in 2004, many steel mills have in turn decided to go the route of "temporary procurement for urgent use." Thus, distributors are having a hard time off loading their goods, and inventory digestion at ports has been quite slow. Indian iron ore suppliers have been very sensitive to the Chinese steel market. They immediately increased their iron ore quotation when China’s steel market took a turn for the better in late June. For instance, the price quotation for 63.5 percent concentrate Indian iron ore exceeded $46/ton (CIF) last week; it is estimated that India iron ore prices may further increase this week. However, after their experience in 2004, Chinese steel mills have become more rational in how they deal with iron ore procurement. They will not let themselves become victims of speculation once again. Thus, while China’s ports continue to hold large inventories and while China’s steelmakers maintain their complicated attitude towards procurement, the price of imported iron ore will have a very limited recovery space.