On May 26, ex-India offers of 63.5 percent grade fine iron ore stood at $180/mt CFR China ports, down $10/mt compared with early May. Meanwhile, aggregate iron ore inventory at the major Chinese ports amounted to 92.46 million mt at the start of this week - close to the peak level recorded at the beginning of the current year.
Domestic market analysts have commented that the high iron ore inventories at the beginning of this year were mainly due to strong purchasing activity sparked by anticipation of higher prices. However, the current high inventories are due to lackluster market activity and the steel mills' reluctance to book iron ore tonnages. Also, given tight availability of funds and slow downstream demand, Chinese mills are more inclined to buy domestic production iron ore materials at low prices and with greater flexibility in payment alternatives.
The declines in prices of imported iron ore will weaken support for steel production costs. The power rationing policy in China has not yet provided any stimulus for the firming up of steel prices. Indeed, some domestic mills have started to lower their steel prices in order to maintain their competitiveness.