NDRC: import iron ore prices in China to soften gradually in Q3

Thursday, 23 May 2019 11:31:22 (GMT+3)   |   Shanghai

Due to multiple factors, including the mining dam disaster in Brazil, the slow recovery in demand from downstream users and supply shortages, import iron ore prices in the Chinese market have indicated sharp increases since the beginning of the current year, as stated by China’s National Development and Reform Commission (NDRC). However, based on the overall situation between demand and supply, the import iron ore prices will move at current high levels in the short term, but will likely soften gradually in the third quarter this year, the NDRC predicts.

On May 16, the price index of 62 percent Australian fine ore at Qingdao port was recorded at $98/mt, up 30 percent compared to the beginning of the year and up 46 percent year on year, while iron ore futures prices at Dalian Commodity Exchange (DCE) were recorded at RMB 678.6/mt ($84/mt), up 37 percent compared to the start of the year and up 41 percent year on year.

Currently, the government of Brazil has loosened restrictions on some of Vale’s mines, which will ensure normal levels of shipments to China up until July.

Meanwhile, in order to complete annual shipment targets, Australian miners Fortescue and BHP Billiton are expected to increase shipments of iron ore in June. Following the previous big rises in iron ore prices, overseas and domestic mines with high production costs have already achieved a certain degree of profitability and are thus likely to increase their production capacity utilization rates.

In the meantime, in April the capacity utilization rates of blast furnaces in China reached their highest level in recent years and so demand for iron ore is unlikely to indicate further obvious increases in the future. Moreover, China will likely implement strict environmental protection measures in the third quarter in Tangshan and other regions due to the 70th anniversary of the foundation of the Chinese state (China’s National Holiday starting from October 1), which will reduce the capacity utilization rates of blast furnaces.

At the same time, inventory levels of import iron ore at Chinese ports will likely increase in July as more new iron ore supplies will be delivered directly to steelmakers in June and July.

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