Posted on 23 Mar 2021
Bearish sentiment triggered by concerns about Chinese iron ore demand is putting iron ore prices under pressure, according to market sources on Monday.
The most-traded iron ore futures contract on the Dalian Commodity Exchange tumbled further on Monday and added to last week’s retreat, with the contract for May delivery plunging by another Yuan 63/dmt ($9.7/dmt) or 5.9% from last Friday’s settlement price to close the daytime session at Yuan 1,004.5/dmt.
“Currently, it seems there’s no good news for the iron ore market about prices,” an analyst with a Zhejiang-based iron ore trading company in East China commented. “Sentiment has suddenly waned after the rather strict production curbs were imposed on steel mills in (North China’s) Tangshan, but there’s also the strong longer-term expectation of domestic crude steel output being pressed down this year,” he elaborated.
Besides, there are also concerns on the iron ore supply side, he warned, pointing out that ore supplies from Australia and Brazil may gradually increase from the second quarter after the seasonal disruptions to shipments fade away. “I can see the fundamentals of the iron ore market weakening further, and if the ore stocks at ports continue to steadily accumulate, how can iron ore prices rise?” he remarked.
A Shanghai-based iron ore analyst with a futures company agreed that iron ore prices have been under great pressure, though he noted that for the short term, the driver might be more about bearish sentiment than actual fundamentals. “Will the real demand among Chinese steel mills be cut by a large amount? We still need to track this volume, because apart from Tangshan, other areas around the country have no rigid production curbs on steel mills for now,” he explained.
But he, like the first analyst, was similarly guarded about how iron ore prices might trend, longer-term. “Against the background of the central government’s ambitious target of achieving carbon neutrality, certainly more steel will be produced in future from steel scrap,” according to him.
Over March 12-18, the blast furnace capacity utilization rate among the 247 steel mills Mysteel regularly tracks had dipped to below the benchmark of 90% for the first time since late May 2020, hitting an 11-month low of 87.16% after a sharp decline by 3.23 percentage points on week.
By March 18, the total stocks of imported iron ore at the 45 Chinese ports Mysteel tracks hit a 22-month high of 130.2 million tonnes, after having climbed for the third consecutive week, rising by another 1.4 million tonnes or 1.1% on week, according to the latest data.
Source:Mysteel Global
