SHANGHAI, Sep 30 (SMM) – Iron ore prices in the Chinese market are likely to climb post the week-long National Day break but then to come under pressure due to production curbs, SMM expects.
Steelmakers are set to restock after the break and this is set to buoy iron ore prices. Shrinking stocks of high-grade materials also prompted traders to hold their offers firm.
SMM data showed that there were around 130 million mt of iron ore stocked across 35 Chinese ports as of Saturday September 29, down from 140 million mt in August. SMM also expects limited growth in seaborne arrivals in the near term.
However, impending winter output curbs, effective from October 1 in Tangshan, are set to weigh on iron ore prices. While the top steelmaking city would avoid blanket cuts this winter, most mills across the region are still facing production cuts by 30%, according to SMM research.
The China International Import Expo (CIIE), slated to be held in Shanghai during November 5-10, is another headwind against iron ore prices.
To control smog during the Expo, Shagang, Yonggang and Zenith Steel in Jiangsu province may be required to halve their production from late October as Jiangsu is geographically close to Shanghai, according to market talks.
Given the Expo, all the construction sites across Shanghai have received the notice from the authorities that requires them to suspend operation during October 23-November 12.
Besides, the market is likely to be oversupplied with iron ore in the fourth quarter of the year as miners overseas would step up their efforts to hit their annual shipment targets.
