Underpinned by frequent macro policies, iron ore price may stand high this week

With sustained futures price gain, iron ore price shot up last week. On the fundamentals side, overseas shipments tumbled in a slack season, making port arrivals falling. In spite of rolling pig iron output uptick amid restart of BFs in the past two weeks, iron ore demand from steel mills had difficulty of hiking sharply as pre-holiday stockpiling was about to end. Therefore, there was a little impact of fundamentals on iron ore price. A big part of the hike in price was due to positive macro news. The National Standing Committee required more powerful measures to stabilize iron ore market. In addition, the PBC will lower the deposit reserve ratio on February 5 to provide the market with long-term liquidity of about 1 trillion yuan. Market sentiment turned optimistic, making for a steep futures price hike. Then iron ore spot price followed to increase, but to a limited extent. In terms of spot prices, the spot prices of PB fines in Shandong gained 20 yuan/mt WoW.

Looking at this week, according to SMM maintenance of BFs, pig iron output will still inch up amid restart of BFs this week. However, overall iron ore demand may change little with the end of stockpiling. Moreover, there will be traditional lull terminal demand. Therefore, iron ore inventory hike will accelerate. Steel mills under pressure will be less motivated to purchase raw materials, suppressing the rise in iron ore price. Participants will still expect the LPR to be lowered. It is expected that iron ore price may fluctuate at high levels this week.