Increasing demand from Chinese mills boosts import iron ore prices

After the sharp price declines recorded in the iron ore market at the end of April, prices trended upwards from the start of last week and closed the week at $61/mt CFR China's Qingdao port for iron ore with 62 percent Fe content. Prices for 62 percent Fe content iron ore have also moved upwards today, May 11, to $63/mt CFR Qingdao. The main reason for this upward movement is the increasing inquiries and purchases of Chinese steel producers. Moreover, iron ore prices have increased in the Chinese futures markets and supported the upward trend of import iron ore prices.
 
Although import iron ore prices in China continue to rise, market sources state that this upward movement is the result of the announcement of Australian miner BHP Billiton of the postponement of its port project aimed at increasing its annual production capacity. Market sources report that new iron ore producers have appeared in Western Australia amid the rises in iron ore prices, exacerbating the oversupply issue in the market.
 
Sam Walsh, CEO of Australian iron ore producer Riot Tinto, announced at the company's annual meeting on May 7 that Rio Tinto will continue to accelerate its investments aimed at increasing its annual production capacity. Additionally, Luciano Siani Pires, financial director of the Brazilian miner Vale, has said that the company has no intention of postponing its investments aimed at increasing its production capacity, while stating that they are targeting a production volume of 340 million metric tons this year and 376 million metric tons for 2016.
 
Despite the strong iron ore prices, Swiss-based global financial services provider UBS foresees a price level of $45/mt for iron ore in the second half of 2015. Iron ore prices have increased due to strong demand from Chinese producers lately, but market sources mostly believe that prices will decline when demand from Chinese steel producers starts to soften.