Iron ore futures prices stood at 922 yuan/mt yesterday, up by 0.88%.
Quotes of spots that arrived at ports were flat from last Friday. Some traders actively shipped, while steel mills generally held a wait-and-see attitude yesterday. The transactions were slack, and the traded price slightly rose.
On the news front, affected by the pandemic in the surrounding areas, since 24: 00 p. m. on April 18, Qian’an, Qian’xi, Luanchuan and Guzhi districts of Tangshan have once again implemented the closed-loop management, and the lifting time will be further noticed.
Last week, the Commission for Discipline Inspection of the Central Committee of the CPC said that because of the sharp increase in prices of iron ore and thermal coal, the committee would organise strong supervision and law enforcement.
On the fundamentals, on the supply side, due to seasonal factors in the southern hemisphere, overseas shipments were generally low in the first quarter, with shipments in Australia and Brazil recovering slowly. It is expected that the iron ore port inventory will continue to decline. At present, the amount of iron ore arriving at ports continues to be low, and the supply is tense in stages. In addition, because of the higher iron ore prices overseas, domestic steel mills preferred to purchase the spots at the port. Therefore, in the short term, the port inventory will decrease rapidly, supporting the iron ore prices.
On the demand side, the shortage of raw materials slightly improved as the pandemic in Binzhou, Tangshan, and Anshan eased. The output of pig iron in steel mills increased as the production slowly recovered, which demanded more iron ores. However, iron ore prices were squeezed by the stockpiling of finished products and the steel mills’ losses.
According to SMM statistics, the operating rates of blast furnaces were 82.39% as of April 15, an increase of 0.44 percentage point from the previous week and up 0.82 percentage point from the previous month.
The slight increase in operating rates was contributed by the resumption of production of some blast furnaces that stopped production due to pandemic and the recovery of blast furnaces from the maintenance. According to SMM survey, there were 28 blast furnaces in China that stopped the production due to the pandemic. Among them, 15 furnaces have resumed the production, and the average daily output of pig iron has been restored to 57,000 mt. 13 furnaces with the combined average daily output of 52,500 mt are still being shut down.
To sum up, SMM believes that the closed-loop management in Tangshan has a limited impact on iron ore. For now, most of the steel mills in Tangshan have applied for permits to ensure the normal transportation and supply of iron ore, thus the demand for iron ore is stable in the short term. However, the losses of steel mills will be deepened further once the coke prices rise for another time, which will put the mills in danger of production reduction. What’s more, the RRR cut and an interest rate cut is expected to take effect in the near future, and the downstream industries’ demand, such as real estate, is going to improve, which will benefit the steel prices. Iron ore prices will remain rangebound in the short term.
Source: SMM
