SMM Analysis of Iron Ore Fundamentals after Prices Hit a New High of Close to 900 yuan/mt

SHANGHAI, Jun 1 (SMM) -  DCE iron ore prices extended its upward trend yesterday, closing up 2.06% at 892.5 yuan/mt. Over the past month, DCE iron ore prices gained 4.32%. The transaction prices of imported ore at domestic ports rose 5-15 yuan/mt yesterday. Prices of PB fines at Qingdao port were 975-990 yuan/mt, and 790 yuan/mt for super special fines.  

On a macro level: According to data released by the National Bureau of Statistics on May 31, China’s manufacturing PMI was 49.6% in May, an increase of 2.2 percentage points from the previous month. The PMI data exceeded market expectations as the impact of pandemic on domestic economy lessened.  

Fundamentals: Arrivals of imported iron ore at Chinese ports dropped slightly, while shipments from Australia and Brazil rose slightly SMM data showed that a total of 81 ships arrived at major ports in China during May 23-29, carrying 12.52 million mt of iron ore, down 390,000 mt on a weekly basis and up 48,000 mt from a year ago. Iron ore shipments from overseas will still have some room for growth.
In general, SMM believes that the current demand for iron ore is increasing steadily, and steel mills have not reduced production, despite losses and high inventories, thus iron ore prices have strong support. At the same time, the pandemic in Shanghai and Beijing has been brought under control, and market sentiment improved. However, considering the inflated iron ore price, policy intervention and weak steel demand, it is expected that the short-term iron ore price will continue to fluctuate widely.