Having increased by 0.27 percent last week, prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port have moved up by $0.8/mt as of today, Monday, November 19, as compared to the closing price at the end of last week, starting the current week at $75.20-76.30/mt CFR China.
The downwards movement of steel prices in the local Chinese market has been reflected to raw material prices and iron ore prices recorded occasional declines over the past week. As of November 15, when the winter production cuts started officially, Chinese steel produces have slowed down their iron ore bookings and global iron ore prices have been negatively impacted by this situation. However, prices have switched to an upwards trend in the latter days of the week due to the decreasing ex-Australia iron ore supplies. As a result, prices of ex-Australia iron ore of 62 percent Fe content closed the last week with a slight increase and have continued this uptrend entering this week. However, prices of iron ore of 62 percent Fe content have entered this week with a fall.
Due to the approach of the winter season, domestic steel demand in China is expected to weaken, though production cuts at Chinese steel mills this year are less strict as compared to 2017 and crude steel production in the country has continued to increase in October. This situation is pointing to an oversupply problem for the coming period and causing domestic steel prices in the country to decrease faster. Since Chinese mills’ profit margins have been negatively impacted by the declines in steel prices in domestic market, they are expected to prefer medium and low grade of iron ore in production process, instead of making high quality iron ore bookings, in order to lower their production costs. However, Chinese mills are not likely to abandon high quality iron ore quickly due to contracts signed previously.
It is expected that global iron ore prices will continue to fluctuate in the coming period amid production cuts and concerns about supplies, though no sharp ups and downs are likely to be observed.