SHANGHAI, Jun 1 (SMM) – Iron ore prices are likely to remain under pressure as a new round of environmental inspections began, SMM believes. Prices are expected to hover in a narrow range next week.

On May 30, the first round of environmental reviews on previous rectification works by China’s central government began in Heilongjiang province, followed by Hebei, Henan, Ningxia and Jiangxi. This month-long review will extend to Inner Mongolia, Jiangsu, Guangdong, Guangxi and Yunnan.

During this period, operation at plants of steel, coke and cement sectors will be affected. This is highly likely to impose pressure on iron ore prices.

Iron ore prices also face pressure from growing port inventories. As of Friday June 1, iron ore inventories across 35 major Chinese ports increased 1.04 million mt from 146.51 million mt a week ago and stood at 147.56 million mt. Daily average volumes delivered from ports this week dipped 6,000 mt week on week to stand at 2.57 million mt.  

Volumes delivered from ports shrank at Rizhao and Qingdao ports of Shandong province, as most local steel mills completed restocking ahead of the Shanghai Cooperation Organisation (SCO) Summit on June 9-10. North and east China saw relatively stable arrivals of iron ore this week.

SMM expects iron ore inventories at Jingtang and Caofeidian ports in Tangshan of Hebei province to carry over its increase from the start of May into the near term, as local steel mills have already been operating at their full capacity and there is therefore limited upward room for iron ore demand in longer term. This is likely to drive up the longer-term iron ore port inventories.

The most traded contract on the Dalian Commodity Exchange weakened on Friday June 1. In the spot market, traders initially raised some offers up 5 yuan/mt but they turned reluctant to let their cargoes go as prices of futures fell. Overall trading was poor as most steel mills have finished their procurement.

SMM's MMi Iron Ore Port Index dipped 2 yuan/wmt to 470 yuan/wmt fot Qingdao on Friday June 1 for 62% Fe fines.

The index for 58% Fe fines gained 4 yuan/wmt to 330 yuan/wmt but the index for 65% Fe fines edged down 3 yuan/wmt to 563 yuan/wmt.

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