Prices of ex-Australia iron ore with 62 percent Fe content for delivery to China’s Qingdao port have started the current week with a small uptick, increasing by $0.2/mt to $87.4-88.5/mt CFR China, as compared to the closing price at the end of last week. Having switched to an uptrend and exceeded the level of $90/mt CFR early last week following Chinese buyers’ return from their holiday, ex-Australia iron prices subsequently failed to sustain this rise and decreased below the $90/mt level since Chinese steel producers’ demand for iron ore was not as good as expected.
Last week, following the news that an annual iron ore capacity of 70 million mt is to be deactivated by mining giant Vale following the collapse of its iron ore tailings dam in late January, the prices of ex-Brazil iron ore with 65 percent Fe content have exceeded $100/mt CFR, as expected. However, since Chinese steel mills have been cautious about concluding bookings at higher price levels and since transaction activity has been slack as some Chinese buyers have not returned from their holidays, ex-Brazil iron ore prices failed to increase further.
According to market sources, demand for Indian pellets in China is increasing due to the ongoing supply crisis in the iron ore market and the uncertainty regarding production volumes. As Chinese steel producers are unlikely to focus on low quality iron ore for their bookings due to the environmental measures in effect in China, they are expected to meet their needs from other import sources instead of Vale. As Brazilian authorities have increased their inspections of mines following the Vale dam disaster, iron ore supplies from other Brazilian producers are expected to be impacted, which may provide support for increases in iron ore prices in the short term. Besides, iron ore prices are expected to move upwards if the US-China trade talks result in positive decisions this week.