Price trend:

According to SunSirs' commodity market analysis system, iron ore prices fluctuated upwards last week (December 13-20), showing a strengthening trend. As of December 20, SunSirs' iron ore price index was 811.33 points, a 1.46% increase compared to the previous week, as shown in the chart above. The main reason for the upward fluctuation and strengthening trend in iron ore prices last week was the rise in prices of ferrous metals, primarily driven by steel mills' unexpected production cuts based on a consensus to combat overcapacity within the industry. This led to improved market sentiment and a rebound in valuations. The market logic shifted from demand concerns to supply contraction, with the key factors being whether production cuts can be sustained and the quality of demand after the off-season. As of December 20, the market was experiencing a supply-driven expectation recovery, with the bottom being consolidated, but a sustained upward trend still needs verification from the demand side.

Market Analysis

Regarding inventory, as of December 19th, the imported iron ore inventory at 45 ports nationwide was 155.1263 million tons, an increase of 812,100 tons compared to the previous week; the average daily port throughput was 3.1345 million tons, a decrease of 57,400 tons compared to the previous week; and the number of vessels in port was 114, an increase of 4 compared to the previous week. The total imported iron ore inventory of steel mills nationwide was 87.2395 million tons, a decrease of 1.1025 million tons compared to the previous week. Last week, steel mill profits remained stable, but the continued decline in pig iron production led to a slowdown in demand, affecting port throughput. Port inventory continued to accumulate last week, although overseas shipments decreased, steel mill demand also decreased simultaneously. The trend of port inventory accumulation is expected to continue this week, and close attention should be paid to changes in port iron ore inventory this week.

On the supply side, as of December 15th, global iron ore shipments totaled 35.925 million tons last week, an increase of 2.24 million tons compared to the previous week.  Shipments from Australia and Brazil totaled 29.655 million tons, an increase of 3.102 million tons week-on-week. Australian shipments reached 20.526 million tons, an increase of 852,000 tons, with 17.021 million tons shipped to China, an increase of 1.139 million tons. Brazilian shipments reached 9.129 million tons, an increase of 2.25 million tons. Last week saw a significant increase in shipments from both Australia and Brazil. The cyclical changes in overseas shipments from Australia and Brazil are mainly influenced by seasonal factors and weather conditions, leading to short-term fluctuations in shipments. In the medium to long term, the iron ore supply remains ample. However, the industry is  in a low season until the end of the year. While iron ore shipments and arrivals have recovered this week, the overall iron ore supply situation is still trending stronger.

On the demand side, as of December 19th, the operating rate of blast furnaces in steel mills was 78.47%, a decrease of 0.16% week-on-week; the capacity utilization rate of blast furnace ironmaking was 84.93%, a decrease of 0.99% week-on-week; the profitability rate of steel mills was 35.93%, remaining unchanged week-on-week; the average daily pig iron output was 2.2655 million tons, a decrease of 26,500 tons week-on-week; the daily consumption of imported iron ore by the sampled steel mills was 2.8056 million tons, a decrease of 27,100 tons week-on-week. Last week, steel mill operating rates continued to decline, and low steel mill profits dampened production enthusiasm. Although some steel mills resumed production this week, the weaker-than-expected finished steel sales may lead to further declines in steel mill profits, negatively impacting demand. It is expected that iron ore demand may recover slightly this week.

Regarding scrap steel, prices trended weaker last week. Scrap steel prices edged down slightly last week, mainly due to weak downstream demand for finished steel products.  The pressure on finished steel prices led to declining profits for steel mills, resulting in reduced production activity and consequently weaker demand for scrap steel. Therefore, scrap steel prices also declined slightly, with some regional price adjustments. It is expected that the scrap steel market will fluctuate within a narrow range this week.

Market Outlook

In summary, according to SunSirs data analysts, the core reason for the high-level fluctuations in iron ore prices this week is the tug-of-war between "strong fundamentals" and "weak expectations." On the one hand, high pig iron production creates rigid demand support; on the other hand, supply remains high, and port inventories have shifted from decreasing to increasing, indicating that the supply-demand structure is marginally weakening. The market will focus on the questions of "when will pig iron production actually decrease" and "will inventory accumulation accelerate." Before these contradictions become clear, prices will maintain a fluctuating pattern with both upper and lower limits.

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