Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $52.5-58/mt CFR last week, have increased by $1/mt since last Friday, starting the current week at $58.5-59/mt CFR China. As of March 14, inventory of iron ore at 33 major Chinese ports amounted to 91.73 million mt, down 1.26 million mt or 1.35 percent compared to the inventory level recorded on March 7, as announced by China's Xinhua News Agency on March 17.
On Monday, March 7, prices of iron ore had increased by 20 percent as compared to Friday, March 4, due to the speculations that steel producers in Tangshan in Hebei Province would have to reduce their crude steel production by 50 percent in order to ease environmental pollution during the Tangshan International Horticultural Exposition from April 29 to October 16 this year and since the steelmakers in question would seek to increase their output before this event. Subsequently, early last week, iron ore prices decreased by $4/mt, but resumed their upward trend on Wednesday, March 16. As expected, the municipal government of Tangshan in Hebei Province has announced that crude steel production in Tangshan will decrease by 5.56 million mt during the period of the exposition. As a result, Chinese steel producers have increased their iron ore bookings as they seek to step up their crude steel production before the exposition, and this has provided support for the uptrend of iron ore prices.
According to Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd, “Positive sentiment in the Chinese steel market is resonating from the plans to loosen margin lending in the stock market. Further gains in house prices are also supporting steel and iron ore.”
Meanwhile, the World Bank, in its latest commodity market outlook, has reduced its forecast for 2016 iron ore prices to $42/mt from a forecast price of $59.50/mt that was made in October 2015. According to the bank, the plunge in the price is a result of continued oversupply, weak demand from the steel production sector in China, and destocking of iron ore at Chinese mills.