Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which moved in the range of $45.5-47.5/mt CFR last week, have increased by $3/mt since last Friday, starting the current week at $50-50.5/mt CFR China. In this context, ex-Australia iron ore prices have increased by 21.7 percent since the beginning of February up to the present, as a result of the tightness of iron ore supplies due to Hurricane Stan and maintenance works at ports in Australia, and since Chinese buyers have started bookings to replenish their stocks after the Chinese New Year holiday.
Meanwhile, according to the report issued by China’s Xinhua News Agency, on February 17, as of February 15 iron ore inventories at 33 major Chinese ports amounted to 90.67 million mt, declining by 1.94 million mt or 2.09 percent compared to February 1.
However, expectations of a downtrend in global iron ore prices are still strong despite the recent increases.
Mitchell Hugers, commodities analyst at BMI Research, lately shared his expectations regarding the Chinese market. "We expect China's economic slowdown to persist over the medium term, which will result in a further weakening of Chinese steel consumption due to declining demand from the country's construction and transport sectors," said Hugers.
Meanwhile, Melinda Moore, director of client coverage at ICBC Standard Bank, stated that the loss of output at Brazil’s Samarco, the joint venture between BHP Billiton and Vale, due the collapse of a tailings dam could support further gains in prices. She said a rebound in ex-Brazil iron ore prices above $50/mt is possible. But others say there is little to evidence to support a sustained rally. According to the research firm Capital Economics, large supply cuts are needed to bring the over-supplied market back into balance.
Lastly, JP Morgan expects Chinese steel production to fall by a further three percent this year and global iron ore demand to fall by around 3.5 percent year on year. JP Morgan has forecast an average iron ore price of $40/mt for the current year.