Global iron ore prices continue to be supported by stock replenishment

Monday, 14 January 2019 16:56:44 (GMT+3)   |   Istanbul

Having fluctuated during the past week and closed the week with an upward movement of 1.73 percent, prices of ex-Australia iron ore with 62 percent Fe content for delivery to China’s Qingdao port have increased by $0.4/mt on Monday, January 14, as compared to the closing price at the end of last week, starting the current week at $72.9-74/mt CFR China. Meanwhile, inventories of imported iron ore increased to 140.6 million mt as of January 7, as Chinese buyers have stepped up the replenishment of their ore stocks.

During last week, Chinese steel producers have continued to conclude bookings to replenish their iron ore stocks ahead of the Chinese New Year holiday (February 2-10), thereby providing support for the upward movement of iron ore prices. Also, the US-China trade talks held in Beijing up to mid-week prompted optimism among market players and positively impacted iron ore prices. Another positive factor that has supported the upward movement of steel and raw material prices has been the news that Chinese government is working on new economic policies aimed to increase domestic production, especially in the automotive and white goods sectors, in order to revive the national economy.

Meanwhile, Tangshan has issued a smog alert, effective for the January 8-14 period and local steel mills were requested to cut their sintering output by between 30 percent and 60 percent or shut down completely depending on emission levels. As a result, demand for raw materials in the region decreased and iron ore prices dipped slightly in the middle of last week.

According to Goldman Sachs and Morgan Stanley, the upward movement of iron ore prices is not sustainable and prices will not remain above $70/mt for long, but will likely switch to a downtrend in the coming period due to increased supplies. Goldman Sachs is expecting global iron ore prices to decrease below $60/mt in the next six months.

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