Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port closed last week with a decrease, while they have started the current week at $88.1-88.5/mt CFR China, up $1.5/mt compared to last Friday, March 10. As of March 6, inventory of iron ore at 33 major Chinese ports amounted to 116.05 million mt, up 1.69 million mt or 1.48 percent compared to the inventory level recorded on February 27, as announced by China's Xinhua News Agency.
Last week, import iron ore prices for China mostly moved down with Chinese steelmakers stepping up their purchases of domestic production iron ore, while showing less interest in concluding purchases of import iron ore. Additionally, the historically high level of iron ore inventories at Chinese ports continued to exert negative pressure on import iron ore prices, with global iron ore prices declining by four percent during the week in question.
This week, global iron ore prices have started the week with an uptrend as a result of the slight recovery in the Chinese domestic semi-finished and finished steel demand and also due to increases in the Chinese futures market. Many analysts and banks forecast a decline in iron ore prices, although no significant declines are expected in the short term since finished steel demand in China traditionally remains strong during the spring months.
Research firm Capital Economics says the recent price surge to about $90/mt could be short-lived, with iron ore prices forecast to fall to $50/mt by the end of the year.
According to Paul Dales, Capital Economics’ chief Australia and New Zealand economist, economic slowdown in China will likely cause iron ore prices to plunge. The research firm expects iron ore prices to decline to $50/mt, while thermal coal prices could drop down to $70/mt, from the current levels of around $80/mt.
The Australian federal government forecasts iron ore prices to average at $68/mt until the end of June, but to slip to $55/mt in the September quarter.
Meanwhile, the declining prices have already had an impact on the shares of the big three iron ore miners, with shares in BHP Billiton, Rio Tinto and Fortescue Metals having fallen by around 12 percent, 15 percent and 13.5 percent, respectively, over the past three weeks.