Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $50-52/mt CFR last week, have remained stable since last Friday, starting the current week at $50.5-51/mt CFR China. As of June 13, inventory of iron ore at 33 major Chinese ports amounted to 95.51 million mt, down only 20,000 mt compared to the inventory level recorded on June 6, as announced by China's Xinhua News Agency.
Iron ore prices, which had remained stable during the Dragon Boat Festival holiday in China on June 9-12, indicated a slight downtrend on June 13, the first day of last week. The weakening of finished steel purchases after the holiday negatively impacted iron ore prices and the prices recorded slight declines in the early part of the week. Meanwhile, with the slight recovery of finished steel bookings towards the end of the week, iron ore prices moved upwards on Friday, June 17, while they have started this week on a sideways trend.
Meanwhile, amid the traditional offseason in China during the summer, expectations that steel demand in the Chinese market will decline have gained strength. Also, with the oversupply in the iron ore market, iron ore prices are expected to fluctuate on a soft trend and to lose value in the coming period. According to the China Iron and Steel Association (CISA), because of the factors mentioned above, iron ore prices are expected to move on a slight fluctuating trend and finished steel prices, which are negatively impacted by weak demand, are likely to exert downward pressure on iron ore prices.
In the meantime, China’s State Administration of Taxation has announced that it is carrying out special audits on tax refunds received by steel producers in Tangshan for exports of square bars and these mills are no longer giving quotations for square bar exports. This situation is expected to impact raw material markets and raw material prices in the coming period.
Market analysts continue to share their forecasts for iron ore prices. According to Credit Suisse, iron ore prices will soften as the market remains oversupplied and so prices will decrease to $40/mt in the second half of calendar 2016, holding at that level until the end of 2020. But the Credit Suisse analysts also repeated an earlier assertion that there is upside to the forecasts, given Chinese plans for a massive infrastructure stimulus that could boost steel demand. Credit Suisse has also stated that the summer slowdown in steel demand is approaching, which, together with tight cash flow, is likely to keep iron ore demand subdued until mid-August. According to Credit Suisse, stronger steel demand is expected in the December quarter for the infrastructure stimulus that China unleashed early in the year. The stronger real demand and improved property outlook are positive for iron ore and steel production trends. Credit Suisse expects to see surplus iron ore production of around 200 million mt in 2018, but suggests that much of this is price-insensitive output from state-backed Chinese producers.
In addition, Citi Group is forecasting a price of $42/mt for 2017, while National Australia Bank expects a fall to $40/mt next year. Macquarie expects an average price of $52/mt in the September quarter and an average of $48/mt in the December quarter, but says the volatile commodity could still touch $40/mt this year.