Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China's Qingdao port, which moved in the range of $39-40.5/mt CFR last week, have increased by $0.5/mt since last Friday, starting the current week at $40.5-41/mt CFR. Meanwhile, iron ore stocks at Chinese ports have increased. As of December 21, inventory of iron ore at 33 major Chinese ports amounted to 90.35 million mt, up 2.29 million mt or 2.6 percent week on week, as announced by China's Xinhua News Agency.
Last week, Australia & New Zealand Banking Group Ltd (ANZ) stated that the rise in iron ore stocks at Chinese ports is a reflection of weak restocking demand from Chinese steel producers. Meanwhile, the imbalance between supply and demand has negatively impacted sentiment in the global market and some Chinese steel mills have cut their production in order to avoid incurring losses. With the addition of the recent mandatory shutdowns of steel producers amid the air pollution seen in Beijing, steel supply in China has declined slightly, causing flat steel prices to rise in China. Under these circumstances, the declining trend seen in iron ore prices has been replaced by upward movement. However, rising iron ore supply in the global markets against the backdrop of the investments of major iron ore producers and declining iron ore consumption in China mean that the upward trend in iron ore prices is expected to be short-lived and will give way to a downward trend in the short term.
In previous weeks, US-based Goldman Sachs predicted that iron ore prices will remain under $40/mt over the next three years as the slowdown in China's steel consumption forces the global steel industry into a long period of stagnation.