Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which closed last week on a downward trend, have increased by $1.5/mt since last Friday, starting the current week at $77.4-77.8/mt CFR China. As of January 2, inventory of iron ore at 33 major Chinese ports amounted to 98.52 million mt, down 500,000 mt or 0.50 percent compared to the inventory level recorded on December 26, as announced by China's Xinhua News Agency.
Meanwhile, the downward movement of global prices of coking coal and iron ore has continued over the past week. Global coking coal prices have decreased by approximately 11 percent, while iron ore prices in the global market have declined by almost three percent in the given period, due to the weakness of demand for iron ore and coking coal in China amid the price decreases in the steel futures market and given the ongoing steel production cuts in China.
However, iron ore prices have started the current week on an upward trend, since Chinese buyers have stepped up their iron ore and coking coal purchases slightly as they are seeking to increase their inventories to some extent before the Chinese New Year holiday and also due to the upward movement of the Chinese steel futures market. However, the Chinese authorities, who have failed to reach a clear solution for the air pollution problems in China, are expected to increase their restrictions in relation to steel mills and this situation is expected to impact iron ore demand in a negative way. On the other hand, market players have stated that previously implemented production cuts had supported prices of finished steel and iron ore in China, and so they do not expect global iron ore prices to record sharp declines in the coming period, despite any weakness in demand. According to a new report issued by the China Iron and Steel Association (CISA), iron ore demand in China in the coming period will likely decrease due to the steel production restrictions implemented within the scope of environmental protection measures and also due to the approach of the Chinese New Year holiday. The CISA stated that iron ore prices will likely fluctuate on a soft trend in the period ahead.
Meanwhile, in its latest report, Australia's Department of Industry, Innovation and Science has forecast a steep decline in the price of iron ore since the unexpected rally fueled by strong demand from China has come to end, forecasting that iron ore prices in 2017 will drop significantly below current prices. However, the 2017 forecast is still up from its previous estimate of $44.1/mt, broadly in line with major banks, against the backdrop of doubts that China's industrial growth will continue to support 1 billion mt of annual iron ore imports. The department’s forecast for the average 2017 price at around $52/mt - down from about $80/mt at present - comes as big miners are set to report bumper profits in coming months, while smaller rivals are still getting back on their feet. The department has predicted iron ore to average at $46.7/mt in 2018. Australia has also lowered its forecast for exports of iron ore by two percent to 832.2 million mt in the fiscal year 2016-17, from 851 million mt previously, although this is still a 5.9 percent rise year on year.