Iron Ore Futures Rebounded Shortly, A Pivot or A Breathing Spell?

SHANGHAI, Jun 24 (SMM) – Iron ore futures finally closed the day with gains after dropped for 12 consecutive days. Yesterday (June 24), the contract rebounded after recording a loss of 4%, and closed the day trading with an increase of 2.46%, and stood at 749.5 yuan/mt.

SMM previously believed that 700 yuan/mt will be the strong support for iron ore futures. However, the contract once dropped to a low of 698.5 yuan/mt the day before, but rebounded shortly after and stood above 700 yuan/mt. Now the questions come as why the contract rebound? How to look into the future dynamics of the contract? Will it still have 700 yuan/mt as the support?

A breathing spell after a deep dive?

Iron ore futures slumped from 933 yuan/mt to 709.5 yuan/mt recorded yesterday after falling for 12 days. Meanwhile, the spot market was also deeply hurt by this lingering downward trend.

The spot market has remained quiet since the contract began its 12-day fall, with only 10 pieces of transactions made as of this Wednesday (June 22) compared with a daily transactions volume of 20-30 pieces when the market was healthy.

Slightly improving terminal demand eased the market sentiment

According to SMM statistics, steel demand improved slightly though steel inventory remained high this week. Meanwhile, more steel mills carried out maintenance since last week, reducing steel output. As such, the market panic eased to some extent.

Meanwhile, supply pressure of iron ore still existed, as future shipments from Australia and Brazil are still expected to rise. The iron ore inventory at ports only fell by 1.71 million mt in the third week of June, and the daily shipments from domestic ports also dropped from 3.18 million mt to 2.93 million mt.

Meanwhile, the blast furnace operating rates fell palpably. As of June 22, the average blast furnace operating rate fell 2.11 percentage points on a weekly basis and 1.74 percentage points month-on-month to 79.23% as of June 22, as a total of 20 blast furnaces newly started maintenance since June 16, most of which are located in north China.

To sum up, though the steel demand has improved slightly, the overall demand continues to contract amid high temperature and heavy rains. And market pessimism also aggravates on high steel inventory. The market shall watch if there will be new blast furnace maintenance plans after the profits of steel mills repair. And iron ore prices are still likely to fall in the near term.