Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China's Qingdao port, which moved in the range of $38.5-40/mt CFR last week, have trended sideways since last Friday, starting the current week at $39.5-40/mt CFR. Meanwhile, iron ore stocks at Chinese ports have increased. As of December 14, inventory of iron ore at 33 major Chinese ports amounted to 88.06 million mt, up 1.49 million mt or 1.7 percent week on week, as announced by China's Xinhua News Agency. Today, December 21, Australia & New Zealand Banking Group Ltd (ANZ) stated that port stocks may rise further due to weak restocking demand from Chinese steel producers.
Iron ore supply has declined slightly, though insufficiently, due to the recent mandatory shutdowns of steel producers amid the air pollution seen in Beijing and due to production cuts by unprofitable Chinese steel mills. As a result, flat steel prices have risen in China over the past week. Additionally, pressure on finished steel prices has decreased amid the US Fed's decision to increase interest rates, and this has provided support for iron ore prices. Although iron ore prices have increased slightly under these circumstances, both the winter lull in construction activities and the rising iron ore supply in the global market 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.
Last week, US-based Goldman Sachs further reduced its expectations for iron ore prices, forecasting that prices will drop to $38/mt next year and to $35/mt in 2017 and 2018. Meanwhile, the China Iron and Steel Association (CISA) has warned iron ore importers to be on the alert for price fluctuations against the backdrop of possible production cuts, complete halts and belt-tightening strategies of Chinese steel plants which are experiencing financial problems and are having trouble with letters of credit ahead of the New Year.