Prices of iron ore of 62 percent Fe content for delivery to China's Qingdao port were at $65/mt CFR China in mid-June and moved on a downward trend from then through the first eight days of July. Chinese producers believed the declining trend of iron ore prices would continue and thus postponed their purchases. With demand falling, prices of iron ore of 62 percent Fe content for delivery to China's Qingdao declined to $44.5/mt CFR on July 8. This price was below the 10-year low of $47/mt CFR Qingdao recorded on April 2 this year and raised concerns of players in the global steel markets. Although the declines seen in the Chinese stock market last week negatively impacted iron ore prices, the main reason behind the falling iron ore prices was the soft trend of local Chinese finished steel prices. Subsequently, following a sudden increase in demand from Chinese producers, prices of iron ore with 62 percent Fe content for delivery to China's Qingdao rebounded and closed last week at $50.5/mt CFR. However, today, July 13, iron ore prices declined by $1/mt to $49.5/mt CFR Qingdao.
Market sources state that it is very hard to foresee a recovery in iron ore prices unless Chinese domestic semi-finished and finished steel start to increase. Meanwhile, the China Iron and Steel Association (CISA) has stated that in the January-May period of this year China's crude steel production decreased by 1.6 percent to 340 million mt year on year, constituting the first decline in Chinese crude steel output in the last 20 years. The decline in Chinese crude steel production is also reflected in the country's reduced iron ore consumption. Besides, it is thought that iron ore prices have not reached the bottom yet and that the downtrend will continue due to the tightening of margins in the Chinese steel sector and due to the decrease in iron ore production costs in Australia and Brazil, the biggest iron ore supplier countries. Citigroup has predicted that iron ore production will continue to decrease towards $30/mt in the second half of this year.