CISA: China's Iron Ore Prices Seen Softening Further

China's iron ore prices are likely to decline from their still relatively high level, the China Iron and Steel Association (CISA) stated in its latest iron ore monthly market analysis released on March 7. The association noted that domestic steel prices had plunged and that it's hard to see iron ore demand among domestic steelmakers making any remarkable rise in the near future.

"Over the past several months the relatively high iron ore price has deviated from the movement of domestic steel prices - something that is unlikely to be sustained," CISA observed in the report.

According to Mysteel's data, the national average HRB400 20mm dia rebar benchmark price, for example, averaged Yuan 3,628/MT ($512/MT) including 13% VAT in March, down by around Yuan 94/MT on month.

By contrast, Mysteel's PORTDEX 62% Fe Australian iron ore fines index averaged Yuan 663.5/wmt FOT Qingdao and including 13% VAT in March, up around Yuan 22/wmt on month. Similarly, the average Mysteel's SEADEX 62% Fe Australian iron ore fines price index in March also increased by around $1.55/dmt from the average price in February to reach $87.86/dmt CFR Qingdao.

"Though the COVID-19 outbreak is controlled in China, domestic steel demand among downstream industries still needs more time to recover, with the result that iron ore demand among steelmakers is not likely to see a rapid increase in the near term," CISA elaborated in the report. "And for the months ahead, domestic steel output is anticipated to continue at a relatively low level, which will then weigh on iron ore demand," the association also stated.

In fact, domestic crude steel output had declined more in March, with the daily steel output among the association's 97 member mills falling by another 4.9% on month to 1.84 MnT/day on average over March 1-20, according to CISA's data. The association also estimated that daily crude steel production for the whole country averaged 2.49 MnT/d over March, representing a 3.33% decrease from the prior month.

An analyst with a Fujian-based futures company in Southeast China also agreed that iron ore prices were under downtrend pressure.

"The COVID-19 outbreak worldwide has impacted steel consumption and steel production in many countries, which is weighing on the global iron ore demand. If this trend continues, some overseas iron ore supply is very likely to swerve to China's market, which will then weaken iron ore prices," he remarked.

"Besides, domestic iron ore demand also faces some uncertainties in the near future in regard to steel demand and steel scrap consumption - the alternative to iron ore for steelmaking," he added.

In fact, over the past several days iron ore prices had shown a further softening trend, with Mysteel's PORTDEX 62% Fe Australian iron ore fines price on April 7, for example, dipping another Yuan 15/wmt from March 31 to settle at Yuan 639/wmt FOT Qingdao including the 13% VAT.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.