Ex-Australia iron ore of 62 percent Fe content for delivery to China's Qingdao port started the last week of May at $61.5/mt CFR, indicated small fluctuations during the week and closed the week at $62/mt CFR. Starting this week, import iron ore prices in China are still at this level. The recent uptrend of import iron ore prices - despite major iron ore producers' announcements of investment plans which will increase their production and lower their costs and despite the oversupply of iron ore - has come as a surprise to market players. Meanwhile, small and medium-scale iron ore producers, which had been under pressure from their high production costs, are now happier amid the recovery of iron ore prices. In early April, Australian iron ore producer Atlas Iron had gradually stopped its production due to the decline of iron ore prices. Supported by the recovery of iron ore prices, the producer in question has announced that it restarted production at its Wodgina mine in the Pilbara region on Friday, May 22.
The 32 percent rise in import iron ore prices over the last two months, following their decline to $47/mt CFR at the beginning of April, is reported to be due to the decrease in iron ore inventories at major Chinese ports. Iron ore inventories in Chinese ports, which were at 100 million mt early this year, currently amount to 84 million mt. The increase in import iron ore prices in China to over $60/mt CFR has caused Chinese steel producers to be more cautious about making new iron ore bookings, resulting in reduced import iron ore shipments and limiting inventory volumes at Chinese ports. Also, import iron ore prices are thought to be under pressure since Chinese steel producers are unwilling to pay higher prices for iron ore in new transactions due to the slight softening of Chinese finished steel suppliers' domestic and export prices. In the short term, import iron ore prices are expected to be determined by the iron ore demand coming from Chinese steel producers, while a wider variety of factors is expected to impact the iron ore price trend in the long term.
In the first four months of the current year, China's crude steel output amounted to 270.07 million mt, down 1.3 percent year on year, as announced by China's National Development and Reform Commission (NDRC). Decreases in Chinese crude steel production have been one of the most important factors affecting import iron ore prices. If the declining trend in Chinese crude steel production continues, the improvement recorded in iron ore prices since the beginning of April is unlikely to be sustained.