Following the declines seen in the Chinese stock market, prices of iron ore of 62 percent Fe content for delivery to China's Qingdao port were at $44.5/mt CFR China on July 8 and moved on an upward trend from then. Prices of iron ore with 62 percent Fe content for delivery to China's Qingdao closed last week at $49.5/mt CFR, while today, July 20, iron ore prices increased by $2.5/mt to $52/mt CFR Qingdao. In the traditional summer offseason, finished steel prices in China have continued to move down, forcing some steelmakers to cut their outputs, resulting in declines in iron ore consumption and putting downward pressure on both locally produced and import iron ore prices. Brazilian iron ore producer Vale said that it will reduce its output of iron ore by 25 million mt in 2015 against the backdrop of the current oversupply problems in the global markets. Additionally, Australia-based Rio Tinto, the world's second biggest iron ore producer, has announced that in the Pilbara region of Western Australia, around seven-ten million mt of shipping capacity was lost directly at the ports due to uncharacteristically severe weather. Therefore for 2015 Rio Tinto adjusted its estimations of global iron ore shipments downwards to 340 million mt from 350 million mt.
Following the announcements made by the major iron ore producers last week, it was believed that iron ore prices which were at $44.5/mt CFR Qingdao might increase sharply due to expectations of a decline in oversupply volume in global markets. However, improvements recorded in prices were very limited. Also, National Bureau of Statistics of China announced that in the second quarter of 2015 Chinese gross domestic product (GDP) has increased by seven percent compared to the same period of 2014. This increase has exceeded the predictions of most economists which were at 6.8 percent. Although, this growth has indicated positive signals for Chinese economy, it has failed to boost iron ore prices. For the third and fourth quarter of 2015 predictions for Chinese import iron ore prices still indicate a downward trend. The main reasons for the unchanged expectations are the declining production costs of the major iron ore producers and the weakening iron ore demand from Chinese steelmakers. However, Vale's ferrous executive director, Peter Poppinga said that their focus is the margins they will have and not in the production volumes.