Iron Ore Prices to Remain Volatile in the Short Term, with Eyes on Demand

SHANGHAI, Aug 5 (SMM) - After the expectations for resumption of production of steel mills were fully digested by the market, the cautious macro sentiment and poor fundamentals dominated the price movement of iron ore. Iron ore futures closed down 4.78% at 756.5 yuan/mt yesterday. 
In the spot market, traders' speculative demand increased, while steel mills restocked as needed.  The transaction prices of PB fines in Shandong were mainly 755-778 yuan/mt, which was 25 yuan/mt lower than in the previous day, while super special fines were sold at 630 yuan/mt, down 30 yuan/mt. The transaction prices of PB fines in Tangshan area were 760 yuan/mt, which was 10-30 yuan/mt lower than the previous day's price.
The expectations for resumption of production of steel mills have been fully digested by the market. Under the background of crude steel production reduction policy, the increase in steel production will be limited. 
The resumption of production of steel plants in Hebei and Shanxi regions was affected by stringent environmental protection requirements. News about coke price hike re-ignited market pessimism.  SMM data showed that iron ore port arrivals in China were 22.56 million mt during July 25-31, a drop of 6.92% from a week ago. Shipments from Australia were 15.57 million mt in the same period, an increase of 9.6% week-on-week, and those from Brazil were 3.02 million mt, a week-on-week decrease of 22.8%.
Shipments from domestic ports were relatively low recently. Steel mills are more cautious in purchasing, and it is expected that the increase in pig iron output will be slow, putting pressure on the upward trend of iron ore prices. Iron ore prices may remain volatile in the short term, with eyes on demand.