Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $59.5-62/mt CFR last week, have moved sideways since last Friday, starting the current week at $60.5-61/mt CFR China. As of August 15, inventory of iron ore at 33 major Chinese ports amounted to 101.57 million mt, down 1.06 million mt or 1.03 percent compared to the inventory level recorded on August 8, as announced by China's Xinhua News Agency.
During the month of August, iron ore prices have fluctuated on an upward trend, due to the increase in finished steel demand in the Chinese domestic market after the end of the rainy season and the increases in the Chinese steel futures market. Meanwhile, Chinese billet export prices have moved up following the Tangshan government’s announcement of local steel production cuts in the range of 30-50 percent in the August 16-31 period in order to tackle environmental pollution. With the increases in Chinese billet offers also supporting the uptrend of iron ore prices, demand for iron ore is expected to decline in the coming period due to the higher prices of ore.
In mid-July, global companies such as Goldman Sachs and Citi Group had increased their forecasts regarding iron ore prices for the second half of 2016, stating that prices will range at $40-50/mt. Meanwhile, Jason Shenker, president of Texas-based Prestige Economics, stated last week that iron ore prices will trend at $60/mt in the second half of 2016, which will cause the average iron ore price for 2016 to settle at $55/mt. Lately, Michael Zhu, former global sales director at Vale SA, has stated that he is not optimistic that iron ore prices will continue to move up and predicted that prices will probably trend between $50/mt and $60/mt for the rest of 2016, while he expects next year to be challenging because, even if Chinese steel production remains at current levels, iron ore supply will increase.