Price trend

Since February, iron ore prices initially fluctuated upwards before rising and then falling back, showing an overall trend of slightly upward fluctuation. According to data from SunSirs' iron ore price tracking, as of the 28th, SunSirs iron ore price index was 767 points, down 5.43% month-on-month. The lowest point of the month was 763.67 on the 24th, a drop of 5.84%, as shown in the chart above.

Market analysis

Looking back at the iron ore market in February, prices continued to decline under the pressure of a supply-demand imbalance. High inventory levels and weak demand were the core issues throughout the month. Although pre-holiday restocking provided temporary support for prices, once the restocking cycle was completed, high inventory levels significantly suppressed prices. By the end of the month, the benchmark price of Australian iron ore had fallen by 5.11% compared to the beginning of the month, and the market as a whole was in a sluggish downward trend.

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 initially rose and then stabilized in February, following iron ore prices. However, due to weak demand for finished steel products, upward momentum was insufficient. Considering that electric arc furnace steel mills also faced profit pressure, and that most of the country entered a holiday period in February, the substitution effect of scrap steel for iron ore is unlikely to increase significantly in March. The scrap steel market is expected to decline slightly in March.

Market outlook                                            

In summary, analysts at SunSirs believe that the iron ore market is expected to continue its weak and volatile pattern in March. The pressure from high shipments and high inventories on the supply side is unlikely to ease in the short term, with global iron ore shipments remaining high. On the demand side, the market faces constraints from anticipated production cuts during important meetings and low profits, making large-scale restocking by steel mills unlikely. The recovery of downstream steel demand remains a key variable; while construction site resumption rates have rebounded, they remain low. Overall, 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 that prices will continue to be under pressure in March, with a focus on the actual extent of steel mill production cuts and the recovery of end-user steel demand.

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