Looks like we might see some stabalisation around these prices for July, with competing forces at play in China.

China to see iron ore supply recover in July

China’s iron ore market will likely see iron ore supply gradually recover this month from the dip in June, according to Mysteel’s latest monthly report releas...

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SteelMint Bureau

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7 Jul 2021, 10:52 IST

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China's iron ore market will likely see iron ore supply gradually recover this month from the dip in June, according to Mysteel's latest monthly report released on July 5. This might ease the tight supply-demand balance and pull iron ore prices off their current highs, it notes.

Mysteel expects iron ore supply from both Australia and Brazil to China to gradually recover this month as maintenance at major ports in these two countries has gradually ended - as evidenced by last month's rally in ore shipments.

Over May 31-June 27, the total volume of iron ore dispatched globally from the 19 ports and 16 mining companies in both countries under Mysteel's weekly tracking reached 103.1 million tonnes, higher by around 5.5 million tonnes from the volume over the previous four weeks. Consequently, the volume of new ore arriving in China from Australia and Brazil this month may also recover.

Other Mysteel data for iron ore shipments show that in June, China's 45 ports received around 84 million tonnes of ore over May 31-June 27, down by 9.4 million tonnes or 10% from the volume over the previous four weeks.

Ore from these two countries include mainstream medium-to-higher Fe grade iron ore products such as PB Fines, Newman Fines, Mac Fines, Jimblerbar Fines and Carajas Fines, as well as some lower Fe grade iron ore products such as, Super Special Fines, FMG Blend Fines and Yandi Fines.

Meanwhile, the firmness of ore prices these days will ensure that most iron ore miners keep their production and export volumes up. Correspondingly, Mysteel also expects domestic iron ore concentrate supplies to recover from the low volume in June. This is because many miners are gradually resuming or ramping up operations after the previous production limitations placed on them were gradually lifted.

Last month, run-of-mine iron ore output was severely disrupted in North China's Shanxi province following a fatal accident in a local underground iron ore on June 10.

Meanwhile, iron ore miners' operations in other areas, especially those of small-scale miners, were disrupted in the last week of June for safety reasons while Beijing hosted grand celebrations for the centenary of the Communist Party of China on July 1, as reported.

The average daily production of iron ore concentrates among the 186 mining companies Mysteel samples fell to a three-month low of 514,200 tonnes/day over June 18-July 1, down for the second fortnight by 27,200 t/d or 5%.

June saw China's imported iron ore prices rebound strongly from the end-May lows, with Mysteel SEADEX 62% Australian Fines index, for example, hovering above $200/dmt CFR Qingdao and reaching as high as $221.75/dmt CFR Qingdao on June 14 - from the May 26 low of $178.15/dmt.

Nevertheless, the report says the downward pressure on Chinese iron ore prices might be partially offset by possible strong domestic demand this month. With the temporary curbs on steel production during June 28-July 1 gradually lifted, many mills will resume operations, while at the same time, some new steelmaking capacity will also commence production this month.

Over June 25-July 1, blast furnace capacity utilization among the 247 Chinese steel mills Mysteel samples fell to the lowest point since March 2020, touching 81.01%. This followed four weeks of decline and made for a sharp drop of 10.16 percentage points on week.

Other factors may also influence iron ore prices going forward, the report warns, with the steel mills' margins being key among them.

If the margins on finished steel remain low, some mills may take this chance to ease back on production, the report argues, especially when Beijing seems still determined to see this year's crude steel output fall below last year's.

Consequently, iron ore demand, especially that for medium- to higher Fe grade iron ore products, may be dampened to some extent, which in turn would serve to further ease the current rather tight availability of such products at many Chinese ports.

Mysteel's survey showed that on average, the profit margins that blast furnace steel mills were earning on a daily bases from making and selling rebar by June 30 had actually became a loss of Yuan 92/tonne ($14.3/t) including 13% VAT, according to Mysteel's assessment based on current steel and raw materials prices.

Elsewhere, the inventories of imported iron ore at the 45 major Chinese ports under Mysteel's regular surveys had swelled to 122.3 million tonnes by July 1, or up for the second week by another 589,500 tonnes on week.

Written by Victoria Zou, [email protected]