Iron ore prices to stay firm in short run on high profits at steelmakers

SHANGHAI, May 9 (SMM) – Iron ore spot prices dipped on Wednesday May 9, SMM learned. 

However, prices are likely to stay firm in the short term, buoyed by high profits at steel mills and growing downstream demand as more steelmakers turned from maintenance in recent weeks, SMM believes. 

SMM sees prices hovering at a narrow range, considering that most steel mills chose to purchase on demand and that demand for products of finished steel have been poor recently.

Based on prices of $67.3/mt for imported iron ore, profits for rebar stood over 1,100 yuan/mt on May 9 at steel plants, up 22% from a month ago. Profits of hot-rolled coil reached 1,300 yuan/mt, up 17% from the same period in April. 

A source at a north steel plant told SMM that its inventories both at the plant and at ports were adequate for less than a month, with its in-plant inventory running out in seven to10 days. Net profits at some steelmakers were heard at 700-800 yuan/mt, he said. He also believed that it will be hard for iron ore prices to pick up as stocks accumulate at ports and as several batches were delivered to the plant during the recent week. 

A suspended steel mill in north China reported lower net profits of 400-500 yuan/mt. It is likely to resume production in mid-May, and more demand for iron ore is expected then. However, this is unlikely to boost iron ore prices as increase in demand is relatively limited.

A steelmaker in east China said that it would stockpile some iron ore before the rainy season in June. Its net profits rose from March and April to 600-700 yuan/mt currently. It mostly uses iron ore with 58% Fe, and the supply of such high-grade ore is sufficient in the market, it told SMM. 

Sources at another east steel plant said they took a relatively optimistic outlook for iron ore prices in the short term, but remained bearish in the mid to long term. 

SMM's MMi Iron Ore Port Index stood at 469 yuan/wmt fot Qingdao on Wednesday for 62% Fe fines, down 5 yuan/wmt from Tuesday May 8.  

The index for 58% Fe fines inched down 2 yuan/wmt to 330 yuan/wmt while the index for 65% Fe fines was down 5 yuan/wmt to 564 yuan/wmt.

SMM and its new price index business Metals Market Index (MMi) launched the iron ore port indices on May 2 as port prices continued to gain importance in pricing iron ore.  

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