Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $59.5-70/mt CFR last week, have decreased by $0.5/mt since last Friday, starting the current week at $65-65.5/mt CFR China. As of April 18, inventory of iron ore at 33 major Chinese ports amounted to 92.62 million mt, down 1.70 million mt or 1.8 percent compared to the inventory level recorded on April 11, as announced by China's Xinhua News Agency.
Early last week, iron ore prices moved on an upward trend with support from increasing billet prices, and increased by $5/mt to $69.5-70/mt on Thursday, April 21, reaching their highest level since September 2014, due to the announcements of production cuts by four major iron ore producers and ongoing stock purchases in China before steel mills’ planned production cuts. However, iron ore prices declined by $4/mt on Friday. Meanwhile, demand for iron ore has been at medium levels during the month of April, and accelerated amid fresh bookings made last week, which provided support for iron ore prices. Iron ore booking activity is expected to continue before the 2016 Tangshan International Horticultural Exposition which starts on April 29. However, demand for iron ore is expected to decrease and pressure on prices is likely to increase in the coming weeks due to production cuts at Chinese mills starting from the beginning of the exposition.
According to Credit Suisse, by the end of 2016 and from 2017 through to 2019 iron ore prices are expected to be back at $40/mt. Meanwhile, Macquarie's iron ore outlook is for iron ore prices to drop to $52/mt in the second and third quarters of this year, followed by a further drop to $48/mt in the fourth quarter. After bottoming at $45/mt next year, the commodity will rebound to $60/mt in 2021, Macquarie said. On the other hand, Citibank expects prices for steel and iron ore to fall in the second half and tips iron ore to average at $45/mt this year. The bank said it expects an average iron ore price of $39/mt during 2017 and $38/mt in 2018.
Also, Tom Price, analyst at Morgan Stanley, has stated that it is difficult to make a case for iron ore remaining above $60/mt, adding that prices will eventually fall back to $45-55/mt because of the ongoing expansion of seaborne supply. Meanwhile, Goldman Sachs Group has stated that the upward trend of steel commodity prices seen this year is not sustainable since iron ore prices are expected to drop to $35/mt by the year-end.