Having increased by 1.52 percent last week, prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port have moved down by $0.2/mt as of today, Monday, October 15, as compared to the closing price at the end of last week, starting the current week at $70.4-71.5/mt CFR China. Additionally, inventory of iron ore at Chinese ports decreased to 143.5 million mt last week, the lowest level this year.
The main reason for the last week’s upwards movement of global iron ore prices was stock bookings of iron ore by Chinese buyers before and after the Chinese National Day holiday (October 1-7). In fact, it is speculated that some Chinese mills did not halt production during the holiday, causing inventories of iron ore to maintain the decline. Meanwhile, last week, Chinese iron ore futures increased to its highest level of the last 30 days, which also supported the rises of iron ore prices in spot market.
Meanwhile, governments in the Yangtze River Delta region also joined Chinese government’s plan for winter production cuts, which will be implied during November 2018-March 2019 period. With the news of new regions being included to winter production cuts in order to struggle with the severe air pollution problem in the country, steel supply in China is likely to be tight in the coming period. On the other hand, the municipal government of Tangshan issued another round of emergency emissions reduction measures effective from 18:00 on October 11 to 24:00 on October 18 and this announcement supported Chinese steel futures, which had switched to a downtrend on Thursday, October 11, to increase again. As a result, iron ore prices closed last week at $71.5/mt CFR China, first time since March this year.
As the winter production cuts in China approach, Chinese steel mills are expected to continue stock bookings of iron ore for a while, which will support iron ore prices.