Global iron ore price slumps on demand concern

Mysteel SEADEX 62% Australian Fines had slumped to $158.7/dmt CFR Qingdao by August 17 - a low since March 22, or down $58.75/dmt on month or $71/dmt from it all-time high on May 12, as the market now is with the prevalent concern on the shrinking demand from China for the rest of the year.

The price decline was a stark contrast to China's domestic steel prices that have been fluctuating since June, though China's national price of HRB400E 20mm dia rebar under Mysteel's assessment, for example, still gained Yuan 64/tonne ($9.9/t) on month to Yuan 5,340/t as of August 17 despite the recent softening since August 12.

The recent disparity lies in the different impacts of Beijing's call for lower steel output on year for 2021 on raw materials and finished steel, as robust demand while less supply may restrict the steel prices from falling too much while less output will most probably lead to less iron ore consumption, and the raw material is losing the ground of support especially when China's steel output decline has materialized.

In July, China's crude steel output fell 8.4% on year to 86.8 million tonnes, or the first on-year decline since April 2020, and its daily crude steel output also fell 10.5% on month to 2.8 million tonnes/day, as reported.

By August 12, blast furnace capacity utilization among China's 247 steel mills under Mysteel's survey was assessed at 85.89% against the 88.55% by July 15.

Mysteel's latest survey also showed that rebar production among China's 137 integrated mills and re-rollers hovered a low since mid-February as of August 5-11 at 3.2 million tonnes.

All these has intensified the pessimism in the iron ore market, and Chinese steel mills have been reducing procurement with some even re-selling the surplus tonnage from their long-term deal supplies, and traders are prioritizing offloading their stocks at hand even at lower prices.

The downtrend may persist for the foreseeable future so long as demand from the Chinese steel mills stay slack, many market sources agreed, though they pointed out that Chines steel prices, if showing some lasting recoveries for the remainder of the 2021, may in turn lend some support to the iron ore price during the period.

Written by Victoria Zou, zyongjia@mysteel.com

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