SHANGHAI, Sep 16 (SMM) - Recently, the negative macro front has weighed on the futures prices of ferrous metals. Under the support of fundamentals, iron ore prices rose in early trading session today, but after the National Bureau of Statistics released the August data on real estate sector at 10:00 a.m., iron ore prices fell in response and hovered at lows, with a decline of 2% at one point. At last, the prices lost 1.24% to close at 715 yuan/mt.

On the macro front, the data released by the National Bureau of Statistics on Sep 16 showed that among the 70 large and medium-sized cities, the number of cities with lower sales prices of commercial residential buildings increased. Moreover, the sales prices in different cities saw either slowdowns in growth or expanded declines. At the same, the national real estate development investment totalled 9,080.9 billion yuan in January-August, a year-on-year decrease of 7.4%. The sales area of commercial housing increased fell 23% from the previous year, and China's real estate climate index dipped further to 95.07.

As critical raw material for house building, iron ore prices are particularly "sensitive" to changes in macro news and terminal demand.

Prior to the data release, the market generally expected the terminal demand to improve, and with favourable macro policies to guarantee the delivery of buildings and promote production resumption, the steel market is expected to flourish. Although the market had been pessimistic about the data on real estate market, it was still shocked when the actual statistics of August was released. 

Aside from the direct impact of the macro news, the support from fundamentals has also weakened.

On the supply side, the iron ore supply basically stabilised. According to SMM data released on Sep 12, the total global iron ore shipments from Sep 5 to 11 amounted to 26.26 million mt, down 17.5% from the previous month. Among them, the shipments from Australia to China stood at 11.95 million mt, down 18.4% on the week, while the shipments from Brazil to China dropped 22.9% from the previous week to 3.17 million mt. During the same period, the total volume of iron ore arriving at ports in China was 15.74 million mt, down 40.5% week-on-week.

On the demand side, the inventory of iron ore across the 35 ports tracked by SMM totalled 133.24 million mt as of Sep 16, a slight increase of 360,000 mt from the previous week and up 2.46 million mt year-on-year. The daily average shipments from the 35 ports decreased 187,000 mt on a weekly basis to 2.712 million mt. The substantial decline was because that steel mills reduced stockpiling after the Mid-Autumn Festival holiday.

The overseas shipments diminished from the previous week, and the daily pig iron output also declined as a result of blast furnace maintenance. SMM data shows that as of Sep 14, the average operating rate of blast furnaces stood at 94.35%, down 0.15 percentage point from the previous week.

It is also worth noting that the Fed will officially raise the interest rates next week, and then the attention shall be paid to whether the final interest rate hike is in line with market expectations. In addition, the government policy to secure success of the 20th National Congress of the Communist Party of China will also have a certain impact on the trend of iron ore prices.

In general, the overall profits of steel mills are poor at present, and they are not enthusiastic about purchasing raw materials. However, with the National Day holiday approaching, steel mills are likely to restock before the holiday based on low inventory, which will help stabilise the demand for iron ore. Therefore, SMM believes that iron ore prices will move upward in the short term.