Iron ore market was still subject to market sentiment last month, and may move wildly in December

Major favourable macro policies at the end of October shored up ferrous metal market sentiment in early November. Overall, market price in November was also greatly affected by sentiment. From the perspective of the industrial chain, steel apparent demand in November was acceptable. Steel stocks shrank significantly in early November. After entering the off-season, terminal demand still showed strong resilience. Fundamentals, ample global shipments and port arrivals were reported during December 4-December 10. The average daily pig iron losses triggered by maintenance of BFs fluctuated slightly. However, a rise in iron ore inventory at ports were slow, unveiling balanced-to-tight supply-demand fundamentals, which offered some boost to ore prices. However, higher regulatory pressure and stricter environmental inspections became a major factor that kept ore prices from surging further in November. Overall, imported iron ore prices hiked in November. PB fines in Shandong increased from 947 yuan/mt in early November to 1,000 yuan/mt. Therefore, profit erosions amid strong raw material prices made steel mills fear of high ore prices. Reacting to regulatory supervision, iron ore prices increased by 5 yuan/mt to 1,005 yuan/mt, and then retraced down to 985-995 yuan/mt.

In December, a possible drop in apparent demand will lead steel inventory to pile up, but this has been priced in by the market. In addition, with mounting overseas shipments, iron ore arriving at Chinese ports will increase in December, and ore inventory at ports will keep building up. Therefore, more ample iron ore supply will be monitored. Pig iron production will seasonally decline. Under this circumstance, weak fundamentals support and intensifying regulatory pressure will probably drag down iron ore prices. In addition, the Political Bureau meeting and the economic meeting will deserve to be monitored. In a word, iron ore prices may fluctuate widely in December.