Review and Outlook for Iron Ore Prices amid Strong Supply and Demand

SHANGHAI, Aug 18 (SMM) -  According to the data of overseas mines tracked by SMM, the overseas mines experienced a seasonal high in the second quarter of 2022 as the output of 17 mines increased 7% from the previous quarter. However, affected by the conflict between Russia and Ukraine, the output of mines in Russia and Ukraine declined year-on-year. In addition to the impact of pandemic, the total output of 17 mines fell by 4% year-on-year. Compared with the first quarter, mine production in Russia and Ukraine in the second quarter both declined due to the conflict between the two countries. The production of Ukraine's FXPO fell by 23%, ranking first among the 17 mines in terms of decline. Russia's Novolipetsk came second, which a 2% drop in the output. BHP Billiton's output also decreased 5% in the second quarter.

Due to the pandemic, heavy rainfall and other factors, some of the shipments in the first quarter were postponed to the second quarter. In addition, the four largest mines in the world had scheduled some of their iron ore projects to be delivered in the second quarter, and some mines also increased the shipments under the pressure of achieving the annual goal at the end of the fiscal year. As a result, the shipments in the second quarter surged. According to the data in the same period of previous years, the shipments of overseas mines usually reach the peak amount in the third quarter thanks to reduced rainfall, favourable mining conditions, and the reduction of other influencing factors. Therefore it is expected that overseas shipments will still increase in the future.

SMM statistics show that the output loss due to blast furnace maintenance in July 2022 added 5.53 million mt or 237% compared with that in June. In July, a total of 78 blast furnaces announced maintenance plans, and the daily pig iron output loss due to maintenance amounted to 254,000 mt. In particular, more than 75% of private enterprises were under overhauls. Since August 1, 31 blast furnaces have resumed the production in China as of today, with a combined daily pig iron output of 107,300 mt. Currently, 52 domestic blast furnaces are still under maintenance, affecting the production of pig iron by 194,800 mt/day. It is expected that with the resumption of blast furnaces, the amount of pig iron affected by maintenance will continue to decline. It is estimated that the production of pig iron will stabilise in September.

Currently, the supply is sufficient, and the demand has improved slightly driven by the resumption of steel mills. However, the domestic port inventories have been accumulating continuously, leading to relatively abundant supply, while the domestic economic growth rate is relatively slow with still weak downstream demand. In this case, the room for further increases in iron ore prices is rather limited. In the medium and long term, the National Development and Reform Commission will attach more importance to secure economic growth, so attention shall be paid to following macro policies. As the high season in September and October for steel market is approaching, market confidence will be boosted, and demand is likely to further increase, thus the ore prices are expected to jump.