SunSirs: With Both Supply and Demand Increasing, Iron Ore May Fluctuate and Strengthen

Price trend

According to the SunSirs Commodity Market Analysis System, iron ore prices rose before falling last week (August 1-8, hereinafter), fluctuating within a narrow range. As of the 8th, the SunSirs Iron Ore Price Index was 785.67 points, down 0.07% month-on-month, as shown in the chart above. The decline followed by a rise in iron ore prices, along with the narrow range of fluctuations, was primarily due to a cooling of speculative demand for iron ore after July's market volatility, although news of production restrictions also stimulated market sentiment. Regarding supply and demand, healthy steel mill profits and active production at these mills supported the iron ore market, limiting the decline in daily molten iron production. However, continued overseas shipments and accumulating port inventories contributed to bearish fundamentals, leading to a decline followed by a rise in iron ore prices, with a narrow range of fluctuations last week.

Analysis review

As of August 8, imported iron ore inventories at 45 ports nationwide stood at 137.9038 million tons, a 51,700-ton increase from the previous week. Daily port throughput was 3.1515 million tons, a 75,900-ton decrease from the previous week. The number of vessels at port was 102, an increase of 4 vessels from the previous week. The chart above shows the port inventory situation for last week. Total imported iron ore inventories at steel mills nationwide stood at 90.1334 million tons, a 12,500-ton increase from the previous week. Following a decline in hot metal production last week, steel mill profits increased, slowing demand for restocking, leading to a reduction in port throughput. Last week, steel mill profits improved. While production remained strong, increased overseas shipments, an increase in port arrivals due to improved weather, and planned maintenance at some steel mills are likely to lead to a buildup of port inventories this week. Therefore, it's important to monitor port iron ore inventory trends this week.

On the supply side, as of August 4th, global iron ore shipments totaled 30.618 million tons last week, a decrease of 1.391 million tons from the previous month. Total iron ore shipments from Australia and Brazil reached 25.322 million tons, a decrease of 2.237 million tons from the previous month. Australian shipments totaled 17.802 million tons, a decrease of 794,000 tons from the previous month. Of this, shipments to China totaled 15.474 million tons, a decrease of 30,000 tons from the previous month. Brazilian shipments totaled 7.52 million tons, a decrease of 1.444 million tons from the previous month. Shipments from Australia and Brazil decreased slightly last week. Overseas shipments from Australia and Brazil fluctuate cyclically, primarily due to seasonal and weather factors. While short-term shipments may fluctuate, the medium- to long-term outlook for iron ore supply remains ample. Recent support for iron ore prices has led to strong shipment activity from suppliers. Iron ore shipments may increase this week, and a recovery in iron ore supply is expected this week.

On the demand side, as of August 8, the blast furnace operating rate at steel mills was 83.75%, a 0.29% increase from the previous week. The blast furnace ironmaking capacity utilization rate was 90.09%, a 0.15% decrease from the previous week. The profitability of steel mills was 68.4%, a 3.03% increase from the previous week. The average daily molten iron output was 2.4032 million tons, a decrease of 3,900 tons from the previous week. The daily consumption of imported ore at the sample steel mills was 2.9814 million tons, a decrease of 13,200 tons from the previous week. Last week, steel mill operating rates remained high, leading to profit growth at steel mills, but this was limited by poor downstream production. However, manufacturers were enthusiastic about production, and some steel mills are expected to complete maintenance this week, leading to a slight reduction in iron ore demand this week.

Scrap prices fell before rising last week, fluctuating within a narrow range. This volatility was primarily driven by overall market conditions. Steel mills were enjoying healthy profits and were operating with high enthusiasm. News of production restrictions has also driven scrap prices higher in some regions, boosting demand for scrap. Scrap prices have adjusted in some regions, and the scrap market is expected to remain stable this week.

Market outlook

In summary, data analysts at SunSirs believe that on the demand side, steel mills were showing healthy profits and were actively reviving production, primarily due to the resumption of production at the terminal. With some blast furnaces resuming production this week, steel mill demand has recovered slightly in the short term, leading to strong speculative trading among traders. On the supply side, cyclical changes in overseas shipments last week led to a slight accumulation of port inventories. With the resumption of overseas shipments this week, supply continues to grow, and the fundamentals of iron ore supply and demand may shift towards a situation of both supply and demand growth. Frequent high temperatures were temporarily limiting downstream terminal production. Last week, the rebound in iron ore prices was driven primarily by macroeconomic factors and news sentiment. There is a possibility of an accumulation of iron ore port inventories this week. In the short term, market sentiment is bullish on iron ore, with speculation prevalent. SunSirs expects iron ore prices to rise first, then fall, with a period of volatility to be stronger. Later in the week, attention should be paid to steel mill profits and actual demand from downstream finished products.

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