Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port have increased by $1.8/mt since last Friday, starting the current week at $83.3-83.5/mt CFR China. As of December 6, inventory of iron ore at 33 major Chinese ports amounted to 102.09 million mt, up 940,000 mt or 0.93 percent compared to the inventory level recorded on November 28, as announced by China's Xinhua News Agency.
During most of the past week, iron ore prices in the global market have moved upwards, while demand has been at medium levels. The halting of production at scrap-based intermediate frequency melting furnaces in China within the scope of new environmental protection measures and the ongoing uptrend of finished steel prices in the country have supported the upward movement of iron ore prices, despite the decline of nearly $35/mt in Australian premium coking coal offers over the past week.
Even though Chinese traders’ inventories of steel products are at high levels, the positive sentiment in the Chinese steel market - which has resulted from the ongoing production cuts in the country and the recovery of the national economy - has gained further strength with China's chief government forecaster stating that Chinese steel demand in 2017 will not decrease as much as previously expected. According to the China Metallurgical Industry Planning and Research Institute, the country's steel demand will fall by just 0.9 percent year on year to 658 million mt in 2017, while overall steel production will fall by 2.2 percent next year to 788 million mt amid slight declines in exports.
In line with the positive sentiment in China (the world’s biggest iron ore importer), the global iron ore market has also started to recover and major iron ore miners are now ready to continue their investment plans, which they had previously suspended. According to The Australian, Australia’s iron ore industry is taking its first tentative steps back towards the development of new mines, with most of the nation’s producers poised to sign off on new projects and studies in 2017 after a years-long freeze on capital expenditure.
As a result of the strengthening of positive sentiment, investment banks and analysts continue to revise their outlooks for iron ore prices in 2017. Goldman Sachs has upgraded its iron ore price forecast to $65/mt, $63/mt and $55/mt respectively for the first three months, first six months and the full year of 2017. Meanwhile, JP Morgan analysts have also increased their 2017 iron ore price forecast to $60/mt from the previous $54/mt.