Having closed last week with a sharp increase, prices of ex-Australia iron ore with 62 percent Fe content for delivery to China’s Qingdao port have remained stable at the first working day of the current week at $101.13-102.31/mt CFR China.
Last week, Chinese liquid steel producers continued to replenish their iron ore inventories and inventories of iron ore at Chinese ports decreased to the lowest levels recorded since October 2017. While Vale has not been allowed to restart production at its Brucutu mine in Brazil, the rumors of maintenance works at BHP Billiton’s mine on July 1-15, which will delay July shipments to August and September, have increased the concerns surrounding the tightness of iron ore supply in the global market. As a result, global iron ore prices recorded sharp rises during the week in question, increasing by almost six percent.
Although Chinese iron ore futures market has started the current week with an upward movement, Chinese liquid steel producers, who have almost completed replenishing their iron ore inventories, are expected to exert pressure on iron ore prices in the coming period due to their expectations that demand for finished steel will weaken during the summer season. As a result, also taking into account the concerns regarding tightness of supply, prices of iron ore in the global market are not expected to record sharp declines, with just slight downward revisions seeming possible.
Meanwhile, according to Vivek Dhar, commodity analyst with Commonwealth Bank of Australia, the high levels of iron ore prices depend on the margins of steel mills and some of the heat may come out of prices in the coming months, though sharp declines are not expected. According to the analyst’s outlook, iron ore prices will be at about $85/mt by the end of the year and there is an upside risk if stockpiles keep falling, while he expects the iron ore price to average at $72/mt next year and at $65/mt in 2021.