Pig iron output may peak in May, and iron ore prices are expected to rise first and then drop in May

Iron ore prices continued to rise sharply in April. Entering April, the end-user demand significantly improved, and the inventory of construction steel began to decline notably. Although the supply pressure of HRC was relatively large, its inventory declined, driven by strong exports. The inventory pressure of steel mills eased, which together with improved profit, greatly boosted the production enthusiasm of steel mills. The number of blast furnaces resumed by steel mills in April reached 31, with the daily pig iron output rising by more than 50,000 mt. During the period, affected by the Australian hurricane and Brazilian heavy rainfalls, overseas shipments and arrivals in China experienced a significant decline, and the market's expectation of iron ore port inventory decline increased. The weak supply and strong demand formed a strong support for iron ore prices. In addition, the selection of special bond projects has ended, meaning funds would be in place soon, boosting market confidence. Overall, iron ore prices rose significantly month-on-month in April. As of the end of April, the spot prices of mainstream iron ore fines at the main ports in Shandong and Hebei increased significantly by 110-135 yuan/mt month-on-month. In terms of supply, the seasonal impact factors in Australia and Brazil have basically been resolved, and there is still a certain increase in shipments; and the ore price has returned to around $120 /mt, keeping mines in non-mainstream countries enthusiastic about making shipments. The overall supply of iron ore in May is still expected to grow. Looking at the demand side, the number of blast furnaces resumed in May is much greater than the number of ones under maintenance, thus the output of pig iron continues to increase. Steel mills restocked after the Labour Day holiday. Growing iron ore consumption may help slow down the accumulation of port inventory, but high stocks compared to the same period of last year may somehow suppress iron ore prices. Considering that the special bond funds will be allocated to enterprises soon and the PMI data performed well in April, the market sentiment in May is still positive. It is expected that there is still room for iron ore prices to rise. However, as pig iron output may reach its peak and the decline of steel stocks may slow down after market supply increases, the upward space for iron ore prices may be relatively limited.