SHANGHAI, May 18 (SMM) – Iron ore prices have remained rangebound recently amid slowly recovering downstream demand and bullish macro policies to boost the real estate. As such, iron ore prices stood at 829 yuan/mt as of closing May 17, up 0.91%.
In the spot market, steel mills mainly stood wait-and-see while the traders negotiated contracts case by case. Intraday transactions were relatively quiet, with most traded at ports in Shandong.
Currently speaking, the slowly recovering downstream demand has pressured the iron ore market as a whole, and some steel mills also cut the production for falling profits, according to SMM research. Nonetheless, falling port inventory indicated relatively strong ore demand.
Macro front:
Over the past weekend, the People’s Bank of China, together with CBIRC, issued a paper announcing a 20 basis point cut in the lower limit of personal loan interest rates for the first home, and the market also rumoured of three real estate companies, naming Country Garden, Longhu and Midea Real Estate, will soon issue bonds, giving the market confidence that real estate policy continues to play a role. Meanwhile, as April real estate investment data is less than expected, the market looks forward to further easing of policy, with "stable growth" maintaining its prominent position.
News front:
On May 13, Vale’s iron ore business executive vice president introduced in a video conference with China Iron and Steel Industry Association vice president Luo Tiejun that, due to the impact of the rainy season in Brazil, Vale’s iron ore output declined in the first quarter of this year. In the second quarter, the company will begin to increase the production, aiming at heightening the output in the second half of the year with an annual output target of 320 million - 335 million mt. Under the premise of ensuring safety, Vale has nearly 100 million mt of production capacity being restored, and a number of new and expansion projects have been launched. Therefore, it is expected that the output in 2023 will rise further, with a goal of achieving an output of 400 million mt to facilitate the recovery and development of Chinese economy.
Fundamentals:
As of May 13, inventories across 35 ports tracked by SMM totalled 135.11 million mt, down 3.2 million mt from the previous week and up 10.8 million mt from the same period last year, with the year-on-year decline continuing to narrow. At the same time, the average daily shipments from the ports rose 46,000 mt week-on-week to 3.094 million mt.
Overall, Vale's production recovery has failed to have a significant impact on iron ore supply in the short term. According to SMM, it is expected that Vale's iron ore output growth will be reflected at the end of the year or 2023. At present, with the increase in shipments of overseas iron ore to China, it is expected that China's supply will improve.
Real estate data is less than expected, but the National Bureau of Statistics spokesman said "in the face of economic downward pressure, the relevant parties are working on incremental policy tools to further stabilise the macro economy", which boosted market sentiment, and more supporting polices are expected to be introduced to promote the futures market.
As such, SMM believes that iron ore prices are likely to rise with driving forces from the macro front.
