Having moved up sharply last Friday and thus increased by a total of 2.33 percent last week, prices of ex-Australia iron ore with 62 percent Fe content for delivery to China’s Qingdao port have moved down by $0.3/mt as of today, Monday, December 17, as compared to the closing price at the end of last week, starting the current week at $69.5-70.6/mt CFR China.
The softening of domestic steel prices in China, which was observed after some Chinese steel mills stated that they would reduce their domestic prices in January, was reflected in raw material prices in China, with prices of import iron ore in the country decreasing in the first half of last week, also due to the negative sentiment in the market resulting from weak steel demand. However, this downtrend was replaced by upward movement in the latter part of the given week, following the news of new production cuts to be implemented in Tangshan in the January 9-31 period, aimed at reducing emission levels and air pollution. As a result, steel prices in the Chinese futures market started to increase, spot market prices recovered, and import iron ore prices once again exceeded the level of $70/mt CFR.
The upward movement of iron ore prices also gained support from the announcement of the start of production cuts in Xuzhou in December. Furthermore, news reports that the Chinese government will likely invest in more infrastructure projects in 2019 have provided additional support for iron ore prices. Also, the slowdown in crude steel production in China created expectations that the problem of oversupply in the Chinese steel sector, thus providing support for steel and iron ore prices in China.
Meanwhile, the first shipment of Australian miner Fortescue’s new 60.1 percent Fe content iron ore fines product has left Herb Elliot Port in Western Australia bound for Chinese steelmaker Hunan Valin Steel, marking the beginning of imports of this new quality iron ore to the Chinese steel industry.
In the short term, global iron ore prices are expected to remain strong amid the positive sentiment in Chinese market due to the expectation that new production cuts will result in an easing of the oversupply problem for a while.