SHANGHAI, Jul 27 (SMM) - Iron ore futures prices have been rising for four consecutive days after the profits of steel mills restored, heightening the expectation for production resumption across the mills. However, as there lacked sustainable support on the fundamentals, the contract moved ranegbound today. As of closing, the iron ore futures ticked up 2.41% to 744.5 yuan/mt, with a combined growth of 14.89% in the past four days.
On the macro front, the Fed's July rate hike expectations have been fully priced in by the market. The next interest rate hike will be in late September, and the pressure on the macro front has eased, boosting the iron ore futures.
On the news front, at the end of July, the Political Bureau of the Central Committee will hold a meeting to study the current economic situation and deploy economic work in the second half of the year. The market has certain expectations for this upcoming meeting.
On the fundamentals, according to SMM statistics, as of July 26, there were 74 blast furnaces under maintenance in China, with a cumulative volume of 88480m³, affecting a total of about 280,000 mt of pig iron per day, down 11,000 mt per day than that on July 25. In addition, 12 blast furnaces resumed the production, engaging a combined pig iron production of 58,000 mt/day. And there will be more furnaces resuming recently.
According to SMM data, 12.41 million mt of iron ore arrived at domestic ports during July 18-24, up 930,000 mt from the previous session and 670,000 mt from the same period last year. During this period, shipments leaving Australia rose 420,000 mt, while those leaving Brazil added 640,000 mt from the last session. However, it is expected that overseas shipments will peak in the third quarter, and port arrivals will rise.
Overall, iron ore futures prices rebounded recently boosted by recent bullish news, improved market sentiment, and cost support. However, the support on the fundamentals is not sustainable, and there is still possibility that the prices will drop. First of all, although the profits of steel mills have been restored, it is unable to cover the overall increase in raw materials prices, hence the steel mills are less willing to purchase, which contains the demand for iron ore. In addition, although the production reduction of steel mills has narrows, the market is still impacted by the production cuts earlier. In addition, iron ore supply pressure remains in place as the arrivals at ports keep rising. Therefore, the iron ore market will still feature strong supply and weak demand. Therefore, it is believed that iron ore prices will remain volatile.