Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $40.5-41.5/mt CFR last week, have increased by a slight margin of $0.5/mt CFR since last Friday, starting the current week at $41.5-42/mt CFR. According to the report issued by China’s Xinhua News Agency on January 25, iron ore inventories at 33 major Chinese ports amounted to 93.63 million mt, increasing by 1.92 million mt or 2.08 percent compared to January 18.
Due to slack finished steel demand in the global markets, Chinese steel producers continue to slow down their production, resulting in declines in their demand for iron ore. Besides, increasing iron ore inventories at Chinese ports continue to exert downward pressure on prices. Even though the overall tendency of import iron ore prices is mostly downward under these market conditions, in the past week prices have generally moved sideways but have also recorded a slight increase, as the withdrawal of most players from the market ahead of the Chinese New Year holiday has provided support for the stability of prices.
Last week, Australian iron ore miners Atlas Iron and Fortescue Metals Group announced their financial results for the last quarter of 2015. Atlas Iron stated that it shipped 3.6 million wet metric tons of iron ore in the quarter ended on December 31, rising by 10 percent compared to the previous quarter. The company stated that the iron ore markets have remained challenging into January this year, though the falling Australian dollar, low freight prices and further interim cost savings negotiated in December 2015 will assist Atlas in remaining competitive during completion of its debt restructuring. Meanwhile, Fortescue Metals Group reported that its iron ore shipments in the quarter ended December 31 totaled 42.1 million mt, increasing by 2.43 percent year on year and registering a rise of one percent from the previous quarter.
In the outlooks issued by research companies and investment banks, iron ore prices are still expected to trend downwards. According an analyst at Citigroup, iron ore prices are being pressured by declining Chinese equities and the depreciating RMB, while macroeconomic developments and financial market positioning are increasingly impacting iron ore prices as paper trading grows. The analyst stated that they are expecting weak steel fundamentals and global iron ore oversupply to continue to weigh on iron ore prices.
Meanwhile, the World Bank has cut its iron ore price estimate for 2017 by 28 percent to $44.1/mt and predicted that prices will remain below $50/mt through 2019 before rising to $51/mt at the end of the decade. The bank also mentioned the risks to its forecasts, including a further economic slowdown in China and extra supply spurred by cheaper production costs and weakening currencies in producing countries.