Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $53.5-55.5/mt CFR last week, have increased by $0.5/mt since last Friday, starting the current week at $55,5-56/mt CFR China. As of June 27, inventory of iron ore at 33 major Chinese ports amounted to 93.85 million mt, up 820,000 mt or 0.88 percent as compared to the inventory level recorded on June 20, as announced by China's Xinhua News Agency.
In the last week of June, the Chinese steel futures market moved upwards, with the Chinese currency gaining strength against the Australian dollar following the Brexit referendum. Iron ore prices rose by $4/mt during the last week of the month after investment bank Morgan Stanley increased its outlook for iron ore prices in the fourth quarter this year from $30/mt to $35/mt. Morgan Stanley has also increased its forecast for the average iron ore price for 2016 by 17 percent to $46/mt.
In the coming period, iron ore prices are expected to be directly impacted by the trend of the Chinese steel futures market. Meanwhile, pressure on iron ore prices is expected to continue in the medium term, both from global oversupply and also since China, the world’s main iron ore importing country, is planning to cut crude steel production amid decreases in iron and steel demand in its domestic market. In these circumstances, iron ore prices are expected to move on a fluctuating trend in the coming period.
In terms of further price forecasts, Goldman Sachs analysts are more optimistic on the iron ore sector prospects compared to Morgan Stanley. They expect iron ore prices will fall to $45/mt in the third quarter and to $38/mt in the fourth quarter of 2016. Analysts at Citigroup recently upgraded their forecasts for iron ore saying Chinese demand may indicate some surprise improvement, but the investment bank still expects a decline to an average of $49/mt this year and $42/mt in 2017 before falling to $38/mt in 2018.