Looser steel production curbs to support iron ore demand, prices in Aug

SHANGHAI, Aug 1 (SMM) – Potential, accelerated production at steel mills in Tangshan will fuel demand for iron ore and continue to provide strong support to ore prices in August. The upside room in iron ore prices will be capped as growing raw materials costs drove steelmakers into losses. 

SMM calculations showed that the impact on iron ore demand from the Tangshan smog control plan is likely to weaken by 3.87 million mt from July to 2 million mt in August, with the affected pig iron output shrinking 1.86 million mt to stand at 1.34 million mt. 

Low inventories will also underpin iron ore prices. Smaller arrivals of seaborne iron ore kept stocks across Chinese ports lower in July, even as tighter production controls in Tangshan weighed on deliveries from domestic ports. 

SMM data showed that iron ore stocks across 35 Chinese ports decreased 380,000 mt from a month ago and 34.03 million mt from a year ago, and stood at 106.3 million mt as of Friday July 26. Daily average deliveries from those ports fell 100,000 mt on the month but increased 150,000 mt on the year, to stand at 2.5 million mt in the week to July 26. 

The weekly deliveries of iron ore from Brazilian ports averaged 6.3 million mt for July, up from 6.2 million mt in June, and may expand further in August on supply recovery. But the weekly shipments leaving Australian ports failed to extend increases as they slid from 14.75 million mt in June to 13.9 million mt in July. 

Inventories of medium- to high-grade concentrate from Australia across six major domestic ports, Qingdao, Rizhao, Jingtang, Caofeidian, Tianjin, and Lianyungang, reduced 1.55 million mt, or 14.6%, from a month earlier as of the end of July. 

Stocks of lower-grade ore such as super special fines and Yandi fines across the six ports accelerated their declines, by 850,000 mt on the month, SMM data showed. 

As of the end of July, SMM’s price index MMi for spot iron ore with Fe 62% climbed 25 yuan/mt on the month to close at 902 yuan/mt. This translated to $122.09/mt cfr, up $3.3/mt, or 2.8% from a month ago.