Prices of ex-Australia iron ore with 62 percent Fe content for delivery to China’s Qingdao port have fallen by $1.8/mt on Monday, January 25, as compared to the closing price at the end of last week, starting the current week at $83.97-85.07/mt CFR China. Having moved up for two days at the beginning of last week due to the ongoing supply shortage, ex-Australia iron ore prices decreased once again at the end of last week, remaining below the $90/mt CFR mark. This slight fall recorded in ex-Australia iron ore prices was explained by Chinese mills’ tendency to avoid iron ore purchases despite the shortages.
After a Brazilian court ordered Vale to halt operations at its Brucutu iron ore mine which will cause an approximate two percent loss in annual production, all eyes turned to Vale’s biggest competitors, the Australian miners BHP Billiton and Fortescue Metals. However, these producers announced that they do not have additional capacity to bridge the gap. Due to the uncertainty about the future - whether other producers will be able to meet the needs of the market - iron ore prices are expected to remain at high levels for some time. Meanwhile, the Brazilian government’s announcement that other waste dams with the same technical structure as Brucutu will be off duty until 2021 is exerting pressure on both small and large-scale miners in Brazil.
Some news outlets state that China will try to balance its iron ore consumption by increasing its scrap usage, while it is also believed that China’s liquid steel output rate as well as its demand for iron ore as a raw material will be the biggest factors determining the future trend of the global iron ore market. Market sources expect some of the shortfall in output to be filled in time as problems affecting Brazil’s iron ore production will be resolved in the medium and long terms. Additionally, the announcement of a delay in the implementation of customs duties within the scope of the ongoing trade negotiations between the US and China may positively influence the international markets.