Iron ore prices to remain firm in Jul even as production curbs lower demand

SHANGHAI, Jul 4 (SMM) – Prices of seaborne iron ore across Chinese markets are expected to remain at highs in July, despite intensifying production curbs at major steelmaking hubs that are set to dent demand.

Fundamentals will remain robust and offer support to prices, as port stocks are unlikely to pick up and as a recovery in profit margins will drive production at steel mills that are not under curbs.

The top steelmaking hub of Tangshan in late June required mills to deepen production curbs until the end of July, while another major hub of Wu’an ordered some sintering machines and blast furnaces to suspend in July. This is expected to lower demand for iron ore by 7.56 million mt in July.

This, together with recovered supplies from Australia and Brazil, impact iron ore prices. SMM data showed that iron ore deliveries leaving Australian ports picked up, and deliveries from Brazilian ports grew for a second straight week in the week ended June 29.

Those leaving Australian ports rose 1.81 million mt from the previous week to 15.93 million mt, and those departing Brazilian ports increased by 340,000 mt to 7.33 million mt.

Maintenance at Australian mines in July, however, is likely to limit the growth in supply, and keep stocks at Chinese port from a substantial rebound.

As of the end of June, iron ore stocks across 35 Chinese ports shrank 8.17 million mt from a month ago and 36.38 million mt from a year ago, to stand at 106.68 million mt, SMM data showed.

Daily average iron ore deliveries from those ports decreased by 47,000 mt month on month, but increased by 139,100 mt year on year, to 2.6 million mt.

Stocks of iron ore fines across Qingdao, Rizhao, Jingtang, Caofeidian, Tianjin, and Lianyungang ports as of the end of June dropped over 6 million mt, or 9% from a month ago, and 17.98 million mt, or some 21% from a year ago, SMM data showed.

In June, those six ports saw their stocks of MAC, Newman, Pilbara, Jimblebar fines shrink 6.9 million mt, or 9.1%, and stocks of lower-grade materials such as Yandi, Blended and Super Special fines decline 340,000 mt, or 4.3%.

As of the end of June, the MMi for iron ore with 62% Fe stood at $118.79/mt, up 12.9% from the end of May; while the price index for spot cargoes at ports gained 12% to 877 yuan/mt.