Posted on 05 Aug 2021
Any remarkable growth in Chinese iron ore demand this month is hard to imagine when most steel mills are under pressure to control steel output, according to Mysteel’s latest market report released on August 2.
This month, any increment in domestic steel output from newly added steel capacity will also be rather limited, the report said. Meanwhile, the strong pressure from the central government for steel output to be curtailed until year’s end should see steel mills’ production decrease further on month.
On the other hand, steel output may still have support from improved steel margins should steel prices remain high and raw materials prices stay weak, according to the report. As a result, iron ore demand is seen remaining largely flat from July.
Last month, daily molten iron output declined further, according to Mysteel’s survey, with the total volume among the 247 blast furnace steelmakers sampled nationwide averaging 2.33 million tonnes/day over July 2-29, or down around 40,675 t/d from the average volume over June 4-July 1.
The decline was mainly because blast furnace operations among some steel mills in North China were temporarily suspended around July 1 for celebrations to mark the 100th anniversary of the founding of the Communist Party of China at that time.
Later, in response to Beijing’s pledge to lower the national steel output total from the 2020 level, many provinces started to request local steel mills to trim output during this half year. This saw many mills review their steel production plans for the coming months, with some even starting to cut output quickly, given that steel demand in summer is usually poor anyway.
The dynamic of lower steel output for the rest of year leading to lower iron ore demand led Chinese finished steel and iron ore prices to head in different directions last month, the report stated.
On the one hand, China’s national price of HRB400E 20mm dia rebar under Mysteel’s assessment rallied to Yuan 5,479/tonne ($847.9/t) as of July 30, or up Yuan 540/t on month, while Mysteel SEADEX 62% Australian Fines index, in contrast, slumped by $36.8/dmt on month to reach $180.2/dmt CFR Qingdao by July 30, a low since May 26.
Regarding ore supplies this month, some increase in iron ore shipments to China from both Australia and Brazil is foreseen. Domestic iron ore concentrates output may also recover, with the gradual resumption of mining operations in some mines in Shanxi province in North China, and elsewhere.
Most underground iron ore mining operations remained halted in July after an accident in a local underground iron ore mine on June 10.
The report concluded that considering the basic supply and demand fundamentals, it’s also hard to see any substantial climb in iron ore prices this month, though a further large drop in the prices may also be limited.
Source:Mysteel Global
