SHANGHAI, Jul. 19 (SMM) – Platts Iron Ore Price Index performed quite well in H1 2017 compared with the same period last year, peaking at $95.5/tonne in February, though dragged down by high port stocks afterwards.
Where will the steelmaking raw material head for the rest of the year?
In the short term, iron ore demand will be affected by maintenance at steel mills in July in response to rainy season, summer heat and the off-season.
In the medium term, all intermediate frequency furnaces were required to be eliminated as of June 30, 2017. SMM survey found decline in rebar supply, triggered by intermediate frequency furnace elimination, will be filled by growing electric furnace capacity. SMM sees new electric furnace capacity at 20-25 million tonnes, which will be released on a large scale after August. Steel scrap demand is beginning to improve along with commissioning of new electric furnace capacity, allowing steel scrap prices to rebound. Based on current steel scrap prices and pig iron cost, steel scrap is losing cost advantage. SMM predicts that steel scrap will be not as economical as pig iron along with rising steel scrap prices in H2 2017. As such, steel mills with blast furnaces might reduce steel scrap use in converter in favor of pig iron, thus allowing iron ore prices to hold firm.
On the other hand, high port stocks and growing shipments by overseas mines will cap gains of iron ore prices, SMM added.
To sum up, SMM expects iron ore prices to move mainly between $ 50-70/tonne in H2 2017.
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