Iron Ore Prices Rebound with Support from Supply Side, Demand Recovery Remains the Focus of Market

SHANGHAI, Jul 7 (SMM) – Iron ore futures rebounded for two days after putting an end to three-day losing streak. However, the rally is not always smooth. The iron ore futures contract experienced both ups and downs yesterday (July 6), and closed the day with a gain of 1.84% at 747 yuan/mt.

In the spot market, traders were less interest in making shipments yesterday, while steel mills were on the sidelines, resulting in lacklustre transactions. PB fines mostly traded at 805 yuan/mt in Tangshan city, flat from a day ago.

Commodity prices have been falling for several days amid recession fears brought on by surging US dollar index. Luckily, the domestic environment is warm and optimistic, easing the downward traction of iron ore futures, which is now subject to the fundamentals.

On the supply side, a total of 77 ships arrived at Chinese ports during June 27 – July 3, according to SMM observation. The iron ore arrivals totalled 10.84 million mt, up 70,000 mt from the last session and 1.9 million mt from the same period last year. The shipments from Australia and Brazil rose significantly during this period.

The iron ore arrivals posted limited growth. At present, the shipments from Australia and Brazil have been at an annual high, with little room for growth in the future.

On the demand side, market has been filled with pessimism with extensive production cuts of steel mills, and the finished products production dropped slightly. According to SMM research, as of July 6, 46 blast furnaces newly started maintenance since June, affecting the pig iron output by 175,000 mt per day. Entering July, though there are still new maintenance plans, it seems to be less aggressive than that in June. Nonetheless, pig iron output will keep falling, and SMM will keep watching the maintenance progress.

To sum up, shipments from Australia did not increase as expected, which offered some support to iron ore prices. However, the domestic steel market is in the seasonal low, and some steel mills cut the production according to the national crude steel output cut target, hence steel prices show signs of stabilising. Coupled with expected additional blast furnace maintenance, the demand for iron ore will fall further. Therefore, it is expected that iron ore prices will fluctuate in a wide range recently with focus on blast furnace resumption and demand recovery.