Having closed last week with an upward movement due to declines in iron ore inventories at Chinese ports, prices of ex-Australia iron ore with 62 percent Fe content for delivery to China’s Qingdao port have declined by $2.09/mt on the first working day of the current week to $106.09-107.18/mt CFR China.
Early last week, Brazilian miner Vale announced that it will spend $1.9 billion to decommission nine upstream iron ore tailings dams and this raised concerns that global iron ore supplies could tighten further in the coming period. Meanwhile, inventories of iron ore at Chinese ports continued to decrease. As a result, global iron ore prices continued to increase throughout the week. Meanwhile, Rio Tinto has delayed July and August loading of Pilbara Blend fines, which increased the concerns about iron ore supplies. Meanwhile, Dalian Commodity Exchange said on Friday last week that it would raise trading limits for iron ore contracts for September delivery, effective from June 18.
Dalian iron ore futures reached a record peak on Friday, June 14, posting the biggest weekly gain since February, supported by expectations of sustained tightness of supply and lively demand amid China’s efforts to support its slowing economy. Subsequently, Dalian iron ore futures fell early on Monday this week, as worries about supply eased, although prices were supported by a strong outlook for demand in China in the short run. According to Reuters, market participants anticipate increased arrivals into China, while they are also keeping an eye on developments which may affect outlook for shipments from Brazil. Meanwhile, Vale expects to recommission 20 million mt of annual capacity at its Brucutu mine, while another 30 million mt of capacity may be restored in the second half of this year once Vale’s Alegria, Vargem Grande and Timbopeba mines receive licences. In the short term, it is expected that inventories of iron ore at Chinese ports will increase and that this will support the sideways movement of iron ore prices.