Posted on 28 Jun 2021
The tight availability of domestic and imported iron ore in the Chinese market currently will gradually ease during the coming July-December half as the growth in supply is forecast to outstrip the incremental rise in demand, according to Mysteel’s latest market report released on June 23.
Supplies of iron ore in China this month will fall short of demand by about 7.13 million tonnes due to the relatively fewer arrivals of iron ore carriers at Chinese ports, according to Mysteel calculations. But the shortage will ease in July, and in fact, China may experience an oversupply of some 2.56 million tonnes due to the expected gradual rise in supplies of imported iron ore.
During the second half of this year, iron ore shipments from both Australia and Brazil are expected to increase after the weather becomes more cooperative, Mysteel predicts, especially as the major iron ore miners will rush to fulfill their annual production/shipment targets.
Meanwhile, output of domestic iron ore concentrates is expected to grow this half too, as the strong ore prices will encourage miners to maintain high operation rates where possible. Some new capacity will also come online, though the strict checks on mine safety and environmental protection systems may constrain the growth to some extent.
Regarding iron ore demand, the growth in output of molten metal this year will largely be from new steel capacity put into production. According to Mysteel’s survey, during January-May this year some 6.3 million tonnes/year of new pig iron capacity was added in the market, and over June-December another 19.62 million tonnes of hot metal capacity will come on stream.
Nevertheless, Mysteel believes the increase in iron ore supply next half will outpace that of demand, with daily iron ore supply forecast to rise to an average of 4.23 million tonnes/day over July-December, or up 200,000 t/d from the average over January-May (which includes an increment of 50,000 t/d in domestic iron ore concentrates supply). During the coming six months, iron ore consumption is predicted to increase too, but only by 80,000 t/d from the average over the first five months to 4.13 million t/d over July-December.
Consequently for full year 2021, Mysteel expects China’s iron ore market to be oversupplied by some 18.98 million tonnes, as against the previous year’s supply shortfall, with the increment mainly appearing in the second half year.
At the same time, the decline in their steel margins and the need to cut costs will lead some Chinese steelmakers to prefer more lower-grade ore products and non-mainstream ore products, Mysteel predicts. This will also help ease the current tightness in some sectors of the market, especially supplies of medium- to higher-grade iron ore brands.
Correspondingly, the support that tight iron ore supply has lent to prices this year will gradually weaken in upcoming months, Mysteel concludes.
For this year, the rather robust demand for iron ore, both in China and worldwide, against the relatively stable supply in the first half year saw iron ore prices skyrocket to a new multi-year high level in May. Though prices declined markedly later, they nonetheless remain at a high level. As of June 23, the Mysteel SEADEX 62% Australian Fines index, for example, stood at $215.35/dmt CFR Qingdao, still some $114.25/dmt higher on year.
Source:Mysteel Global
