Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $53.5-56.5/mt CFR last week, have decreased by $2.5/mt since last Friday, starting the current week at $52.5-53/mt CFR China. As of May 16, inventory of iron ore at 33 major Chinese ports amounted to 93.57 million mt, down 870,000 mt or 0.92 percent compared to the inventory level recorded on May 9, as announced by China's Xinhua News Agency.
Since the beginning of May, iron ore prices have now declined by a total of 19 percent, due to the decreases in steel futures prices in China and also against the backdrop of the downtrend of Chinese billet offers resulting from decreases in domestic finished steel prices in China. Meanwhile, iron ore prices, which had moved on a decreasing trend in the first two weeks of May, recorded a slight recovery during the past week, supported by the slight increase in iron ore purchases in China amid the temporary increase of steel futures prices. However, the Chinese steel futures market has started this week on a soft trend and so Chinese finished and semi-finished steel prices have decreased both in the domestic and export markets. Accordingly, the slight rebound in iron ore prices has ended and iron ore prices have started the current week on a declining trend. In the coming period, demand for iron ore coming from Chinese crude steel producers is not expected to recover significantly, because inventories of semi-finished and finished steel are on the high side in the Chinese spot market and also at Chinese ports. Considering the oversupply problem in the global iron ore market, iron ore prices are expected to fluctuate on a soft trend in the coming period.
Meanwhile, analysts state that iron ore inventories at Chinese ports will likely rise in the coming period, given the increases observed in iron ore shipments in the global market. According to Australia’s Department of Industry, Innovation & Science, Australia and Brazil will export a combined 1.24 billion mt this year, from 1.13 billion mt in 2015, as Australia’s top miners boost outputs this year, while smaller rivals are also increasing their supplies. Meanwhile, Australian miner Atlas Iron has stated that it shipped a record volume of iron ore in the first three months of this year. Furthermore, Zhao Chaoyue, an analyst at China Merchants Futures Company, has predicted that iron ore shipments will probably continue at high levels without many hiccups and that port inventories will continue to accumulate in China in the coming period. In this context, the increases in iron ore shipments in the global market are expected to increase the downward pressure on iron ore prices in the coming period, amid the weakening of iron ore demand in China.