Diverse expectations in global iron ore market

Monday, 27 July 2015 18:02:45 (GMT+3)   |   Istanbul
       

Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port began last week at $52/mt CFR China, mostly moved on a stable trend during the week and closed the week at the same level. Iron ore prices have also remained unchanged at the beginning of this week at $52/mt CFR China. Lately, most market players have been expecting that iron ore prices will decrease to $40/mt CFR China and below by the end of the current year. However, Gina Rinehart, owner of Australian mining giant HPPL Group, stated last week that iron ore prices will recover and will increase to $80/mt CFR, based on expectations of stronger demand for iron ore from Chinese steel producers.
 
Meanwhile, Brazilian iron ore producer Vale has announced that its production increased by 7.4 percent year on year to 85.3 million mt in the second quarter this year, its second-highest quarterly volume. Also, the company underlined that decreasing its production costs is among its goals in the coming period. Vale plans to increase its iron ore production by 16 million mt year on year to 270 million mt in the financial year 2015-16.  On the other hand, Australian iron ore producer BHP Billiton has stated that its iron ore production in the financial year 2014-15 increased by 12.6 percent year on year to 254 million mt, in line with its target. 
 
In the third week of July, demand in the local Chinese finished steel market recovered a little, following the end of rainy season. Accordingly, Chinese finished steel prices increased slightly in the domestic market. However, finished steel transaction activity slowed down once again in China during last week, preventing any possible increases in iron ore prices. Meanwhile, negative data on the Chinese economy continue to be heard. 
 
Even if some big market players expect that iron ore prices will move on an upward trend, a significant rise in iron ore prices is not expected due to the decreasing iron ore production costs and higher production volumes of major producers and due to the negative outlook for the Chinese economy.


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