Price trend

Since January, the iron ore market has experienced an initial upward trend followed by a decline after reaching a high point, showing an overall volatile but generally stronger trend. According to the price tracking data from SunSirs, as of January 31st, the SunSirs iron ore price index was 811 points, a decrease of 0.75% compared to the previous month. The index reached its highest point of 842.78 points on January 22nd, representing a 3.14% increase, as shown in the chart above.

Looking back at the iron ore market in January, iron ore prices initially fluctuated upwards, then surged before falling back. According to data analysts at SunSirs, this can be broadly divided into two stages: firstly, a period of upward fluctuation. At the beginning of the month, driven by expectations of winter stockpiling and replenishment, daily port throughput remained high, and pig iron production remained stable. Coupled with optimistic market expectations regarding macroeconomic policies, iron ore prices fluctuated upwards, and speculative trading sentiment was positive. The convergence of futures and spot markets drove up spot iron ore prices, resulting in a fluctuating upward trend in ore prices.

Secondly, after an initial surge, the market pulled back, and market sentiment shifted rapidly in mid-to-late January. End-user demand fell short of expectations, the pace of finished steel inventory reduction slowed, and steel mill profits remained stable. However, overseas shipments strengthened, and iron ore prices began to decline from their highs. Towards the end of the month, market sentiment cooled due to macroeconomic factors. Therefore, the overall market trend in January showed an initial surge followed by a pullback, resulting in a generally strong but volatile performance.

Market Analysis

Regarding inventory, as of January 30th, the imported iron ore inventory at 45 ports nationwide was 170.2226 million tons, a week-on-week increase of 2.5573 million tons; the average daily port throughput was 3.3231 million tons, a week-on-week increase of 0.2158 million tons; and the number of vessels in port was 109, a week-on-week decrease of 13. The total imported iron ore inventory of steel mills nationwide was 99.6859 million tons, a week-on-week increase of 5.7977 million tons. Last week, steel mill profits decreased, and pig iron production remained relatively stable with only a slight decrease. Due to the release of pre-holiday inventory replenishment demand from steel mills, port throughput increased. Last week, port inventory accumulated significantly. Although winter stocking demand was released, overseas shipments increased. The trend of port inventory accumulation is expected to continue next week, so it is necessary to pay close attention to changes in port iron ore inventory next week.

On the supply side, as of January 26th, the total global iron ore shipments last week amounted to 29.783 million tons, a week-on-week increase of 485,000 tons; the total iron ore shipments from Australia and Brazil reached 23.943 million tons, a week-on-week increase of 1.476 million tons. Australian shipments totaled 18.374 million tons, a week-on-week increase of 1.493 million tons, of which 14.876 million tons were shipped to China, a week-on-week increase of 978,000 tons. Brazilian shipments totaled 5.568 million tons, a week-on-week decrease of 18,000 tons. Last week, Australian and Brazilian shipments increased slightly. The cyclical changes in overseas shipments from Australia and Brazil were mainly affected by seasons and weather. While short-term shipments may fluctuate, 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, and iron ore shipments and arrivals may decrease next week, but the overall iron ore supply situation is still trending stronger.

On the demand side, as of January 23rd, the operating rate of blast furnaces in steel mills was 79%, a week-on-week increase of 0.32%; the utilization rate of blast furnace ironmaking capacity was 85.47%, a week-on-week decrease of 0.04%; the profitability of steel mills was 39.39%, a decrease of 1.3% week-on-week; the average daily pig iron output was 2.2798 million tons, a decrease of 0.012 million tons week-on-week; the daily consumption of imported iron ore by the sample steel mills was 2.8096 million tons, a decrease of 0.094 million tons week-on-week. Last week, the operating status of steel mills remained largely unchanged. Declining steel mill profits and stable pig iron production, coupled with poor downstream finished steel product sales, dampened steel mills' enthusiasm for production. While there was some demand for winter stockpiling from steel mills recently, the uncertain spot market conditions make it difficult for steel mill profits to rise, negatively impacting demand. It is expected that iron ore demand may slightly decrease next week.

Regarding scrap steel, scrap steel prices in January initially rose and then stabilized, following the trend of iron ore prices. However, due to weak demand for finished steel products, the upward momentum was insufficient. Considering that electric arc furnace steel mills were also facing profit pressure, and with most of the country entering holiday mode in February, the substitution effect of scrap steel for iron ore is unlikely to increase significantly in February. Therefore, the scrap steel market is expected to experience a slight decline in February.

Market outlook

In summary, SunSirs’ data analysts believe that the iron ore market is expected to show a weak and volatile trend in February. The core contradiction lies in the fact that the increase in supply is clear and direct, with both global shipments and arrivals increasing month-on-month, exacerbating the pressure of high port inventories; while the strength of demand recovery remains to be seen. Although pig iron production is expected to rebound, its ability to absorb the increased supply is questionable. Before demand is proven to be strong, the market will struggle to overcome supply pressure, and prices will remain under pressure..

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