Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which closed last week on a sideways trend, have decreased by $0.3/mt since last Friday, starting the current week at $80.7-81.3/mt CFR China. As of December 12, inventory of iron ore at 33 major Chinese ports amounted to 102.04 million mt, down 50,000 mt or 0.05 percent compared to the inventory level recorded on December 5, as announced by China's Xinhua News Agency.
During the past week, global iron ore prices have continued their fluctuating trend, increasing by around 0.99 percent during the course of the week despite the sharp declines in Australian coking coal prices. Market sources consider that the ups and downs in global iron ore prices seen last week are due to speculative activity, while demand for iron ore in the Chinese market has weakened.
Meanwhile, the strong uptrend of finished steel prices in China seen last week amid ongoing production cuts has boosted the positive sentiment in the Chinese steel market. As a result, despite the declines in iron ore consumption in China caused by steel production cuts, iron ore prices are expected to continue their fluctuating trend in the short term instead of indicating sharp declines.
Strong supply globally is a key reason why analysts remain downbeat on prospects for iron ore prices despite the better-than-expected recent demand. Macquarie analysts are questioning the extent of the recent price rally, stating that iron ore prices have remained disconnected from fundamentals since late October, moving in the range of $60-83/mt CFR China despite clearly abundant supply of iron ore. Macquarie has updated its demand numbers, reflecting the recent strength in Chinese demand. However, the investment bank stated that iron ore supply remains abundant with prices above $60/mt and, with Chinese mining costs lower in US dollar terms given recent RMB depreciation, they do not see a return of cost inflation in iron ore mining which justifies prices anywhere near current levels.