Having moved down last week, prices of ex-Australia iron ore with 62 percent Fe content for delivery to China’s Qingdao port have increased by $2.4/mt on the first working day of the current week to $94-95.1/mt CFR China. As of April 18, inventory of iron ore at 45 major Chinese ports decreased to 138 million mt.
Having had started last week with a downward movement since Chinese buyers had exerted pressure on global iron ore prices, prices of ex-Australia iron ore with 62 percent Fe content continued their downward movement during the week due to the expectation that iron ore supplies would increase as Vale announced in mid-week that it would resume production at its Brucutu mine within 72 hours. As a result, ex-Australia iron ore prices decreased by a total of one percent during the week in question.
Prices of steel and iron ore in the Chinese futures market have started this week with an upward movement supported by the announcement by the Chinese government that it will continue to support the national economy, which is still under downward pressure despite its better-than-expected growth in the first quarter. Meanwhile, the municipal government of Tangshan in China’s Hebei Province has announced that, due to anticipated increases in air pollution, it has decided to implement level II emergency response measures effective from 8:00 on April 20 to 24:00 on Aril 25. This situation has created concerns that production cuts may be extended and that steel supplies may decrease. "If Tangshan strictly implements production restrictions in May, we would see steel supply falling more sharply than demand," Gu Meng, analyst at Orient Futures, said in his statement to Reuters. "With increasing steel prices and therefore profit margins at mills, prices of steelmaking raw ingredients will also go up despite decreasing demand," the analyst added.
According to market sources, iron ore and steel futures prices in China may gain support if the production cuts in Tangshan continue in May. Also, in the short term, global iron ore prices will likely remain strong since the Chinese government’s determination to support the national economy is positively impacting the raw material and steel markets.