Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $53.5-55.5/mt CFR last week, have remained stable since last Friday, starting the current week at $53.5-54/mt CFR China. As of May 9, inventory of iron ore at 33 major Chinese ports amounted to 94.44 million mt, up 1.56 million mt or 1.68 percent compared to the inventory level recorded on May 2, as announced by China's Xinhua News Agency.
During the past week, iron ore prices have decreased by $5/mt, under the influence of the $45/mt decline seen in Chinese billet prices. Meanwhile, the most-traded steel rebar contract on the Shanghai Futures Exchange lost 12 percent in price last week, the biggest weekly drop since the instrument was launched in 2009, causing domestic finished steel prices in the Chinese spot market to decline, which also negatively affected iron ore prices. In the coming period, oversupply in the iron ore markets is expected to continue to exert pressure on global iron ore prices and it is anticipated that iron ore prices will continue to fluctuate on a downward trend in the short term.
Meanwhile, according to a research report issued by BMI Research, a Fitch Group company, low steel prices caused by an oversupplied market will make it difficult for Chinese steel producer to remain profitable and the subsequent lesser demand for iron ore will push prices lower. Furthermore, Xin Guobin, vice minister for industry in China, stated that, while iron ore prices have been improving since the end of last year, there has not been any fundamental change in the underlying conditions of the market and no amelioration in the overcapacity situation.
According to calculations based on data released by China’s National Bureau of Statistics, Chinese steel production in April fell from March levels, although average daily production rates increased from 2.28 million mt to 2.31 million mt. Liu Zhenjiang, secretary general of the China Iron and Steel Association, had commented last month that, while cutting steel capacity is important, controlling steel output is more important.