With positive macro expectations against regulatory risks, iron ore prices are expected to be volatile this week

There was no positive macro news at the beginning of last week. In addition, weak construction steel demand was monitored, owing to rain, snow and cold wave weather. Market sentiment appeared relatively pessimistic, and ferrous metal market swung on a subdued footing. However, Houthi’s attack on merchant ships in Red Sea and falling deposit interest rates shored up market sentiment, and ferrous metal market started picked up. On the fundamentals side, pig iron output still dropped last week, but the decline slowed down significantly, while iron ore inventory at ports remained tight. Therefore, fundamentals still offered support for iron ore price. Under this circumstance, iron ore price first weakened and then strengthened last week. In terms of spot prices at ports, the spot prices of PB fines in Shandong dropped 7 yuan/mt last week.

Looking at this week, recent overseas shipments of mines surged towards the end of this year. Port arrivals nosedived two weeks ago amid weather fallout, but picked up last week, and will mount aggressively. With more plans of annual BF-related maintenance, pig iron output may plummet, but meanwhile steel mills with low ore inventory may refill stocks ahead of the Spring Festival. Under this circumstance, overall iron ore demand may linger. In addition, current macro sentiment picked up. Meanwhile, there were poor profits of steel mills and lingering regulatory risks amid too high ore valuations. Therefore, it is expected that iron ore prices may continue to be volatile this week.