Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $61-66/mt CFR last week, have remained stable since last Friday due to the Labor Day holiday in the Chinese market, starting the current week at $65-65.5/mt CFR China. As of April 25, inventory of iron ore at 33 major Chinese ports amounted to 93.14 million mt, up 520,000 mt or 0.56 percent compared to the inventory level recorded on April 18, as announced by China's Xinhua News Agency.
Iron ore prices, which had increased to $69.5-70/mt due to the announcements of production cuts by four major iron ore producers and ongoing stock purchases in China before steel mills’ planned production cuts during the third week of April, started the last week of April on a downward trend due to the slowdown in stock purchases, but increased by $4.5/mt during the last two days of the week amid support from the increase in domestic billet prices in Tangshan province. Meanwhile, stocking activity has ended in China with the beginning of the 2016 Tangshan International Horticultural Exposition on April 29. In this context, global iron ore prices are expected to move downwards in the coming period, due to the pressure on prices from decreasing demand and the ongoing oversupply problem in the iron ore market.
Meanwhile, analysts still maintain their view that current levels of iron ore prices are unsustainable and that prices will fluctuate in the range of $40-55/mt during 2016. According to analysts Matthew Ross and Jie Ma, while increased fixed-asset investment in China, a bring-forward of steel production ahead of a government curtailment and mining disruptions help to explain the strong rally in the iron ore price, however the one driver that concerns them the most is the increased speculation in the Chinese iron ore futures market.
On the other hand, the World Bank has revised its iron ore price forecast in an upward direction. The bank now foresees the iron ore price at $50/mt this year, at $51.5/mt in 2017 and at $56.2/mt by 2020. This compares to its January outlook for $42/mt this year, $44/mt in 2017 and $51/mt by 2020. Meanwhile, Goldman Sachs has stated that the iron ore price will regress to $35/mt by the end of the current year.