Having indicated a fluctuating trend last week, prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port increased by $0.1/mt as of today, Monday, July 16, as compared to the closing price at the end of last week, starting the current week at $63.40-64.50/mt CFR China. Following the decrease recorded in iron ore inventories in China during the week ending July 6, inventories once again switched to an upward trend during the week ending July 13, reaching 153.5 million mt.
According to media reports last week, steel mills in the center of the Tangshan region will have to cut production by 50 percent for blast furnaces and by 30 percent for other plants, while sintering machines and shaft furnaces will have to decrease their output by 50 percent, due to the new environmental policies to be implemented by regional authorities in the coming period. No official statement has yet been heard from the authorities in Tangshan, while representatives of steel mills also stated that no official announcement has been made. However, the reports in question prompted the Chinese steel futures market to move upwards in the given period.
Meanwhile, early last week the Chinese government stated that major steel mills have to launch real-time emissions monitoring systems by the end of the year in order to control air pollution in the country. Also, China’s cabinet has launched a new cross-ministerial leadership group, headed by vice-premier Han Zheng, to help draw up plans to tackle air pollution in the Beijing-Tianjin-Hebei region.
While the Chinese government has announced new production cuts in order to control air pollution, the steel mills which have fulfilled their environmental requirements are expected to restart production and make iron ore bookings in order to replenish their inventories. Market sources state that at least two steel mills in the Xuzhou region are ready to restart production. Last week, these market developments continued to provide support for global raw material prices, while the trade war between the US and China exerted additional pressure on iron ore prices both in the spot market and the futures market. As a result, iron ore prices fluctuated during last week, closing the week 0.24 percent lower as compared to July 6.
According to Bloomberg, demand for high quality iron ore in China may increase due to ongoing production cuts and prices may increase to $100/mt in the coming period. Lately, the gap between prices of 62 percent Fe content iron ore and 65 percent Fe content ore has almost reached $30/mt.
In a recent development, the municipal government of Tangshan in China’s Hebei Province has issued another round of emergency emissions reduction measures for sintering machines and shaft furnaces, effective on July 13-18. Also, steel demand in China is expected to weaken amid heavy rainfall and a flood alert in the country, which in turn will also negatively impact raw material prices. As a result, global iron ore prices are expected to continue their fluctuating trend in the coming period.