Having closed the previous week with an increase, prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port have moved up by $0.5/mt on Monday, May 22, compared to last Friday, starting the current week at $63.2-63.6/mt CFR China. As of May 15, inventory of iron ore at 33 major Chinese ports amounted to 114.67 million mt, up 470,000 mt or 0.41 percent compared to the inventory level recorded on May 8, as announced by China's Xinhua News Agency.
Over the past week, as a result of the upticks in finished steel prices and steel futures prices in China, global iron ore prices moved up by two percent, with a fluctuating trend.
Iron ore demand is expected to increase with the steel production cuts during the One Belt One Road Forum in Beijing in mid-May coming to an end, while Chinese domestic finished steel prices have started the current week on an upward trend due to the acceleration of stocking activities in the domestic market. Accordingly, global iron ore prices have also begun the week with an increase. In the coming days, as long as stocking activities continue in the Chinese steel market, iron ore prices will likely continue to rise, though it is believed that, when steel stock replenishment activities end, iron ore prices will fluctuate in a downward direction given the high level of iron ore inventories at Chinese ports.
“Stockpiles are high, but what matters more than the absolute volume is the quality,” said Dane Davis, an analyst at Barclays Plc. “When steel demand is running hot, high volumes of stockpiles don’t matter, as they are lower-quality ores and not needed at the moment. However, when steel demand slows from high production volumes, then stockpiles matter, and matter fast. We expect a greater preference for lower-quality ores in the coming months, and that should begin the reduction in iron ore inventories,” Davis said. While it remains possible that iron ore inventories at the ports may reach 150 million mt this year, it is unlikely as the market for steel will cool before that happens, he added.
China’s iron ore stockpiles are at record levels and prices will decline to $50/mt by the fourth quarter of 2017, according to Deutsche Bank (DB). A team of DB analysts visited China and assessed the current state of the market, including changes in steel production and how that will influence the outlook for iron ore prices. The analysts forecast that steel demand in China will grow by three percent in 2017, before slowing to 0.5 percent growth in 2018.