Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $56.5-63/mt CFR last week, have decreased by $1/mt since last Friday, starting the current week at $55.5-56/mt CFR China. As of March 7, inventory of iron ore at 33 major Chinese ports amounted to 92.99 million mt, up 870,000 mt or 0.9 percent compared to the inventory level recorded on February 29, as announced by China's Xinhua News Agency on March 8.
On Monday, March 7, prices of ex-Australia iron ore of 62 percent Fe content had increased by 20 percent as compared to Friday, March 4, rising to $63/mt CFR China. However, as of Wednesday, March 9, prices had declined by $4/mt, having switched to a downward trend. Commenting on the recent sharp increase in iron ore prices, Li Xinchuang, deputy secretary-general of the China Iron and Steel Association (CISA) admitted that the price increase observed last Monday came as a surprise, though he added that he did not expect the rally to be sustainable. The CISA official also said he believed the price increase would not hold because of the lack of a “fundamental underlying change in the market”.
Meanwhile, the Commonwealth Bank of Australia has also expressed the view that the sharp increase in the iron ore price above $60/mt is unsustainable, predicting prices will regress to $40-45/mt in the short term."We currently forecast China's crude steel output to contract again this year due to weaker domestic consumption, with steel exports unlikely to provide any real offset as countries put up trade barriers on steel," the bank said in a note.
"We believe the recent iron ore price rebound was mainly led by steel price increases. But with a lack of fundamental support for steel, we believe the iron ore price surge will be short-lived," said Helen Lau, an analyst at Argonaut Securities (Asia) Ltd.
Goldman Sachs has also predicted that any increase in raw material prices will prompt more supplies to enter the market, making it difficult for any advance to be sustained. Jeffrey Currie, commodities analyst with Goldman, stated that the surge in iron ore prices would prove temporary and reiterated that oil will fluctuate between $20/mt and $40/mt a barrel. He said higher prices are much harder to sustain in a supply-driven market.
In a note issued last Friday, an analyst with ANZ Research stated, “China’s recent National People’s Congress provided some positive news for commodity markets by stimulating domestic demand and outlining structural reforms,” adding, “However, any policy support will likely be neutral for the steel and iron ore sectors.”