Product trend

According to data from SunSirs' commodity market analysis system, iron ore prices fluctuated upwards last week (February 20-28), trending stronger. As of the 28th, the SunSirs iron ore price index was 811 points, down 0.56% week-on-week, as shown in the chart above. Last week, the iron ore market exhibited a narrow range of fluctuations and under pressure. The main reason was that although futures prices rebounded slightly last week due to macro sentiment and capital speculation, spot prices remained generally stable with a slight decline under the pressure of a strong supply and weak demand fundamental, resulting in a cautious market trading atmosphere. Overall, transaction volume was sluggish, with steel mills mostly adopting a cautious attitude and mainly purchasing on an as-needed basis.

Market Analysis

Regarding inventory, as of February 27th, the total imported iron ore inventory at 45 ports nationwide was 170.9196 million tons, an increase of 1.4564 million tons week-on-week; the average daily port throughput was 2.9848 million tons, a decrease of 527,100 tons week-on-week; and the number of ships in port was 111, a decrease of 10 week-on-week. The port inventory situation for iron ore last week is shown in the above figure. The total imported iron ore inventory at steel mills nationwide was 90.851 million tons, a decrease of 16.1884 million tons week-on-week. Steel mill profits recovered last week, and pig iron production increased because basic operating rates were maintained during the Spring Festival, slowing demand release and thus increasing port throughput. The port inventory accumulation last week was mainly due to increased overseas shipments. The trend of port inventory accumulation is expected to continue next week, and close attention should still be paid to changes in port iron ore inventory.

On the supply side, as of February 23, global iron ore shipments totaled 33.209 million tons last week, an increase of 6.31 million tons week-on-week; shipments from Australia and Brazil totaled 27.133 million tons, an increase of 5.984 million tons week-on-week. Australian shipments reached 20.108 million tons, an increase of 5.402 million tons week-on-week, of which 17.091 million tons were shipped to China, an increase of 3.949 million tons week-on-week. Brazilian shipments reached 7.025 million tons, an increase of 582,000 tons week-on-week. Shipments from Australia and Brazil increased significantly last week. The cyclical changes in overseas shipments from Australia and Brazil are mainly affected by seasons and weather. While short-term shipments may fluctuate, in the medium to long term, the iron ore supply remains ample. With the resumption of production after the Lunar New Year and active shipping by overseas merchants, iron ore shipments and arrivals may increase next week, and the overall iron ore supply situation remains bullish.

On the demand side, as of February 27, the blast furnace operating rate of steel mills was 80.22%, up 0.09% week-on-week; the blast furnace ironmaking capacity utilization rate was 87.45%, up 1.05% week-on-week; the steel mill profit margin was 39.83%, up 1.3% week-on-week; the average daily pig iron output was 2.3328 million tons, up 27,900 tons week-on-week; and the current daily consumption of imported iron ore at sample steel mills was 2.8871 million tons, up 31,700 tons week-on-week. Last week, steel mill operations recovered somewhat, steel mill profits increased, pig iron output increased, and downstream finished steel transactions recovered somewhat after the holiday, which is beneficial to the release of steel mill demand. It is expected that iron ore demand will increase slightly next week.

Regarding scrap steel, prices fluctuated narrowly last week. The slight increase was mainly driven by the overall market trend in the ferrous metals industry. Post-holiday demand for finished steel products was released, steel mill profits improved, and steel mills' operating rates increased, which benefited the release of scrap steel demand. Therefore, scrap steel prices still have room to rise. While some regional scrap steel prices have been adjusted, the scrap steel market is expected to fluctuate narrowly next week.

Market outlook

According to analysts at SunSirs, the iron ore market is expected to continue its narrow range-bound, weak trend next week. Positive factors include technical support in the futures market and lingering policy expectations ahead of important meetings, which may limit a sharp price decline. However, negative factors dominate: 1) The pressure of high shipments and high inventory on the supply side is unlikely to ease in the short term; 2) On the demand side, the expectation of production cuts and low profits limit the probability of large-scale restocking by steel mills; 3) Market concerns about medium- to long-term oversupply persist. In summary, before the core contradiction of strong supply and weak demand is resolved, the upside potential for iron ore prices is extremely limited. It is expected to continue to be under pressure next week, with a focus on the actual extent of steel mill production cuts and the recovery of end-user steel demand.

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.