Having fluctuated and increased by 2.23 percent last week, prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port have remained stable as of today, Monday, August 13, as compared to the closing price at the end of last week, starting the current week at $68.10-69.20$/mt CFR China.
Having strengthened following the Chinese government’s announcement of new production cuts, Chinese steel futures market continued to move upwards and to provide support for iron ore prices in spot market last week. Meanwhile, due to the lack of sufficient electricity in Hebei region since electricity consumption in the country has reached peak levels amid extreme temperature, some steel mills have been obligated to decrease their production or commence their production during hours when electricity use is at minimum levels. This situation has also provided support for Chinese steel futures market.
On the other hand, Chinese steel mills’ high profit margins have also supported the upward movement of global iron ore prices. According to report by Haitong Futures, profit margins at Chinese steel mills are currently around 1,100 CNY/mt, near record levels in December and this situation has provided support for the increases in raw material prices.
Meanwhile, the ongoing trade war between the US and China is continuing at high tension, still exerting pressure on Chinese economy. For this reason, the positive sentiment resulting from increasing futures in Chinese market is remaining limited and some declines are being observed in iron ore prices occasionally.