Iron ore prices increase amid higher billet prices in China

Monday, 18 April 2016 16:58:28 (GMT+3)   |   Istanbul
       

Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $55.5-60/mt CFR last week, have increased by $2/mt since last Friday, starting the current week at $59.5-60/mt CFR China. As of April 11, inventory of iron ore at 33 major Chinese ports amounted to 94.32 million mt, up 550,000 mt or 0.59 percent compared to the inventory level recorded on April 11, as announced by China's Xinhua News Agency.
 
Iron ore prices, which generally moved sideways during the first week of April, have increased over the past week in line with the sharp uptrend of prices in the local Chinese billet market. Although iron ore prices declined slightly on Thursday and Friday last week, they increased by seven percent overall in the past week. Meanwhile, Chinese buyers have accelerated their iron ore bookings ahead of the 2016 Tangshan International Horticultural Exposition which starts on April 29, with demand for iron ore currently at medium levels. In the period leading up to this event, demand for iron ore in China is expected to remain at medium levels and prices are foreseen to move on a fluctuating trend.  
 
Meanwhile, following the price increases recorded during the past week, the consensus among market analysts is that prices will move on a fluctuating trend in the short term. However, they still maintain their predictions that iron ore prices will move on a downward trend in the long term since there is no sign of a solution for the global oversupply problem. Rio Tinto chief executive Sam Walsh stated that iron ore prices could fall in the second half of the year as additional supply outpaces any increase in Chinese demand, while iron ore prices are currently volatile as Rio Tinto had expected. McKinsey & Co. said last week that iron ore would trade in the price range of $45-50/mt this year, while Goldman Sachs is more bearish, forecasting iron ore to end the year at about $35/mt. The global iron ore market faces increasingly severe oversupply, according to Citigroup Inc., which said the price gains made by the commodity will probably be reversed in the second half of this year. “Prices may remain high in the second quarter before the rally fades,” Citigroup commented. “Weaker-than-expected Australian exports and more resilient Chinese steel production have kept prices elevated. However, both trends are likely to be reversed in the medium and long term.” Iron ore may average at $45/mt in 2016, at $39 next year and at $38 in 2018, according to Citigroup, making upward adjustments from its previous forecasts of $39/mt for this year and $35/mt for both 2017 and 2018.


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