Import iron ore prices for China increased in the second half of 2023 amid a number of factors such as steady demand, low inventories at Chinese ports, higher production costs and rising futures prices, while there was limitation on supply, according to the China Institute of Metal Mining Economics.
As of the end of 2022, global reserves of iron ore amounted to 180 billion mt, with the average Fe content at 47.22 percent. “Global iron ore output amounted to 2.314 billion mt, while crude steel output reached 1.831 billion mt in 2022, and so the demand for iron ore did not exceed 2.17 billion mt, signaling there is no supply shortage in the iron ore market,” said Zuo Geng, chief expert at the China Institute of Metal Mining Economics in a report titled Analysis of China's Iron ore, Manganese and Chromium Resource Security and Supply Situation. China’s dependence on overseas iron ore stood at around 83 percent, which is easily affected by vulnerability to force majeures or emergencies in the supplying countries like Australia or Brazil.
In the January-October period this year, China imported 975.84 million mt of iron ore, while domestic production output of iron ore amounted to 825.76 million mt, indicating that there was sufficient raw material supply for 744.75 million mt of pig iron production.
The increasing production cost in the global market also bolstered import iron ore prices. For instance, the FOB cost of iron ore in the global market increased from $28.9/mt in 2016 to $38.7/mt in 2022.
At the same time, speculation in the iron ore futures market affected iron ore prices.
Moreover, iron ore prices rose faster than steel prices during the upward price movement, while they fell slower than steel prices when prices were declining, thereby eroding steelmakers’ profitability.
