SHANGHAI, Sep 29 (SMM) - In the traditional peak season in September, disturbances such as the pandemic outbreaks and typhoons delayed the transmission of terminal demand. Besides, the expected impact of the Fed's interest rate hike aroused pessimism in the market, so non-ferrous metal prices fluctuated with occasional drops. However, with the production resumption of all overhauled blast furnaces, the output of pig iron reached its peak. As of September 7, SMM’s survey of 190 steel mills showed that the output of pig iron reached 2.28 million mt. In addition, approaching the National Day holiday, the steel mills restocked on rigid demand, pushing up the demand for iron ore and also strongly supporting the ore prices. Undoubtedly, the ore prices grew. According to SMM's research in the past two weeks, the pre-holiday restocking of steel mills has ended. After the restocking, iron ore inventory days of steel mills in Shanxi are 15-25 days, that of mills in Hebei are 10-20 days, that of mills in Shandong stand mostly at 15-20 days, and that of mills in regions alongside the Yangtze River and inland China are 25-30 days.
At the beginning of September, overseas shipments were decreased by typhoons, resulting in low arrivals in September. The port inventory kept falling, reducing the supply pressure, but the sufficient supply remained still. As a result, iron ore prices fell first and then rose in September. By the end of September, spot prices of mainstream concentrate at major ports in Shandong and Hebei dipped 5-10 yuan/mt MoM. The traded price of PB fines in Shandong was 745 yuan/mt on September 28.
Can iron ore prices continue to grow in the peak season for terminal demand in October?
On the supply side, September should be the peak period for overseas shipments, but in September 2022, due to factors such as poor domestic demand and typhoons, the shipment volume stayed almost unchanged from the previous month. In order to complete the annual goal, the major overseas mines will increase their shipments in October. It is expected that the overseas shipments in October will grow further.
On the demand side, in October, environmental protection and production restrictions will begin in the Beijing-Tianjin-Hebei and surrounding areas. Since September 27, the sintering machines of steel mills in Tangshan, Hebei have implemented a 30-50% production reduction. Besides, Taiyuan and Jincheng in Shanxi province issued relevant documents for production restrictions during the heating season. Bad weather conditions will also cast certain restrictions on steel and coking enterprises. At present, the blast furnaces maintain normal production, but the operation of sintering machines is restricted. And due to the previous domestic mine accidents, the demand for lump has soared recently, and the prices become higher. According to SMM research, the prices of PB fines in Qingdao Port were 830 yuan/mt in early September, and those of the Newman sieved lumps in Caofeidian Port were 860 yuan/mt. At the end of September, the prices of PB fines and Newman sieved lumps in these two ports added 50-60 yuan/mt to 880 yuan/mt and 918 yuan/mt respectively. The market shall pay attention to the environmental protection-related production restrictions in north China.
Overall, terminal demand is still picking up in October. Subject to the expectation that the coke prices will still rise, the profits of steel mills will remain at the current level. The demand for iron ore may decrease slightly as the environmental protection-related production restrictions are advanced because of the major meeting in October. However, the port inventory will start to increase amid the growing overseas shipments, which may suppress the rise in ore prices. Therefore, SMM believes that iron ore prices will rise first and then fall in October.