Output Cut Weakened the Demand for Iron Ore and Prices of Imported Ore may Fall in May

SHANGHAI, May 11 (SMM) - In April, the government announced no output cut or increase in crude steel. In terms of fundamentals, although overseas seasonal disturbances subsided in April, the arrivals at Chinese ports declined obviously due to the poor weather condition in Australia. However, the maintenance of blast furnaces in Shanxi and the production cut caused by poor demand for finished products triggered sight decline in pig iron output. Fortunately, some steel mills with low raw material inventory still had stockpiling demand for the Labour Day holiday. On the whole, the prices of iron ore continued to decline in April. The spot prices of mainstream fines at major ports in Shandong and Hebei dropped more than 100 yuan/mt from the previous month. In the first ten days of April, the prices of iron ore exceeded 910 yuan/mt, but then fell below 800 yuan/mt at the end of April with the expansion of the production reduction of steel mills and the negative feedback in the industrial chain.

The weak terminal demand, poor profits of steel mills and the weak overseas economy may affect the DCE prices of iron ore. Given the sufficient overseas supply, falling pig iron output, price cut of coke and weakening demand caused by the rainy season, the profits of steel mills is unlikely to improve. On the whole, the iron ore prices may run weakly in May amid the unfavourable factors.