During the second week of April, the import iron ore market in China did not see much movement in terms of prices, with the price of imported 62 percent Fe content iron ore at $47-48/mt CFR Qingdao port. Early last week, however, the price of imported iron ore in China started to rise, increasing to $50.5/mt CFR Qingdao port as of Tuesday, April 14. Today, imported iron ore prices in China have incrased further by $1/mt to $51.5/mt CFR Qingdao port. The sudden increase in import iron ore prices, which had fallen to a 10-year low of $47/mt in the first week of April, came as a surprise to some market players. The reasons for the increases in iron ore prices were the strong interest from Chinese steel producers in iron ore priced at to $47/mt CFR as well as increased demand in China following the end of domestic producers' overhaul projects.
However, the recovery of import iron ore prices does not promise much hope for the coming period. According to Chinese economic data, announced on Wednesday, April 15, the Chinese economy grew only by seven percent year on year in the first quarter of this year, the lowest level recorded in the last six years. Also, in the first quarter this year crude steel production in China, which annually imports 70 percent of global iron ore production, decreased by 1.7 percent to 200.1 million mt on year-on-year basis, with the decline in Chinese crude steel production contributing to reduced iron ore demand from China.
On the other hand, Rio Tinto, BHP Billiton and Vale, the big three global iron ore producers, have stuck to their decisions to increase production despite shrinking Chinese iron ore demand. Brazilian iron ore producer Vale is targeting iron ore production of 340 million mt in 2015, 20 million mt higher year on year. Meanwhile, the Australian producers BHP Billiton and Rio Tinto are respectively targeting iron ore outputs of 225 million mt and 330 million mt, with the latter figure up 35 million mt year on year. In addition, Rio Tinto official Sam Walsh has said that the company's iron ore production costs of $19.5/mt in 2014 have now declined almost to $17/mt. This announcement from Rio Tinto, which has the lowest iron ore production costs among global iron ore producers, exerted increased pressure on the other big iron ore producers, prompting them to make investments aimed at reducing their production costs.
The ongoing investment projects of the biggest iron ore producers aimed at decreasing their production costs have played a very important role in the 30 percent decrease in import iron ore prices since the beginning of this year, besides the economic contraction and decreasing iron ore demand in China. Considering the 2015 investment targets of the major iron ore producers, the outlook for the iron ore prices in the coming period does not seem promising. Also, Joe Hockey, treasurer of Australia, stated that iron ore prices may decrease to $35/mt CFR China within this year and that the government has determined a strategy for this possibility. This announcement may also be considered as an indication of new declines in iron ore prices in the coming period.