[SMM Brief Analysis] Iron Ore Prices Show V-Shaped Trend in November, Expected to Remain Strong in December

Review of Iron Ore Market in November

In November, iron ore prices exhibited a V-shaped trend, with the I2501 contract reaching a peak of 806.5 yuan/mt. The early November rise was mainly driven by macro sentiment, with strong policy expectations following the US election and domestic business meetings. Additionally, pig iron production was still in a slight growth phase. However, in mid-November, environmental protection-driven production restrictions in the north affected steel mill production, and as these expectations materialized, the bullish factors were exhausted. Market sentiment weakened, and iron ore prices began to decline. In late November, iron ore prices rebounded again. This rise was partly due to moderate performance in industry data during the off-season and the initial stage of pre-Chinese New Year restocking. Moreover, market expectations for two important meetings in December were also strengthening.

Outlook for Iron Ore Market in December

SMM believes that the trend of fluctuating upward in iron ore prices will continue into December. Although end-use demand is entering the off-season, especially with declining demand for construction materials, steel mills are also switching production. Currently, the supply-demand imbalance in the industry is not prominent. Steel mill inventory pressure is not significant, and most steel mills are still profitable, making voluntary production cuts unlikely. Pig iron production is declining, but the decline is limited. According to current blast furnace maintenance plans, about 13 blast furnaces are scheduled for maintenance in December, while 8 blast furnaces are planned to resume production. The overall impact from maintenance is expected to increase by over 630,000 mt MoM, averaging a daily reduction of approximately 20,400 mt of pig iron. Additionally, crude steel production has been declining this year, reducing the likelihood of future policy-driven production restrictions. Furthermore, steel mill raw material inventories remain low, and pre-Chinese New Year restocking is still anticipated. Some steel mills have already started restocking imported cargoes, and spot cargo restocking is expected to increase significantly in mid-to-late December. Overall, iron ore demand is still expected to increase. On the supply side, December will see the onset of the shipping off-season, with seasonal factors increasingly disrupting iron ore shipments. Weekly shipments may decrease by 2-3 million mt from current levels, and port arrivals are also expected to decline.

SMM Global Iron Ore Shipments (Unit: 10,000 mt)

On the macro side, there are two important meetings in December: the Politburo meeting and the Central Economic Work Conference. Based on signals released from late September to early October and recent performance, market expectations for policies from these meetings are strong. Market sentiment is optimistic, providing strong support for ore prices. Therefore, we believe that iron ore prices still have room to rise in December. The Platts 62% price index has the potential to break above $110/mt, and the January contract is estimated to reach around 880 yuan/mt.