SunSirs: With Supply Increasing and Demand Decreasing, Iron Ore Prices Are Likely to Trend Weaker

Market Overview: 

According to the commodity price analysis system of SunSirs, iron ore prices fluctuated upwards last week (December 6-13, the same below), showing a strengthening trend. As of the 13th, SunSirs' iron ore price index was 799.67 points, a decrease of 0.76% compared to the previous week, as shown in the chart above. Last week, iron ore prices fluctuated upwards and showed a strengthening trend, mainly due to the continued dominance of weak fundamentals in the market. Macroeconomic policies did not exceed expectations, failing to boost market confidence. Negative feedback deepened at the industry level: weak demand led to accelerated production cuts by steel mills, and the decline in molten iron production exceeded expectations. Finished steel maintained a weak supply and demand balance; although total inventory decreased, the inventory-to-sales ratio continued to rise, and the inventory structure deteriorated—traders dumped goods to reduce inventory, and steel mill inventories began to accumulate, increasing pressure. Both supply and demand for raw materials decreased, putting pressure on iron ore prices. Overall market sentiment was cautious, and willingness to stockpile for the winter was low.

Market Analysis

Regarding inventory, as of December 12th, the imported iron ore inventory at 45 ports nationwide was 154.3142 million tons, an increase of 1.3061 million tons compared to the previous week; the average daily port throughput was 3.1919 million tons, a weekly increase of 0.0074 million tons; and the number of vessels in port was 110, a decrease of 3 compared to the previous week. The total imported iron ore inventory of steel mills nationwide was 88.342 million tons, a decrease of 1.5053 million tons compared to the previous week. Last week, steel mill profits continued to decline, leading to a slowdown in demand and a decrease in 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 next week, and close attention should still be paid to changes in port iron ore inventory.

In terms of supply, as of December 8th, the total global iron ore shipments last week amounted to 33.686 million tons, a week-on-week increase of 454,000 tons; the total iron ore shipments from Australia and Brazil were 26.553 million tons, a week-on-week decrease of 1.105 million tons. Australian shipments totaled 19.674 million tons, a week-on-week increase of 1.47 million tons, of which shipments to China amounted to 15.882 million tons, a week-on-week decrease of 29,000 tons. Brazilian shipments totaled 6.879 million tons, a week-on-week decrease of 2.574 million tons. Last week, Australian shipments increased slightly, while Brazilian shipments decreased slightly. The cyclical changes in overseas shipments from Australia and Brazil were mainly affected by seasonal factors and weather conditions. While short-term shipments may fluctuate, in the medium to long term, the iron ore supply is expected to remain ample. However, the industry is temporarily in a low season until the end of the year. Next week, both iron ore shipments and arrivals are expected to recover, but the overall iron ore supply situation is still trending towards strengthening.

Regarding demand, as of December 12th, the operating rate of blast furnaces at steel mills was 78.63%, a decrease of 1.53% week-on-week; the capacity utilization rate of blast furnaces was 85.92%, a decrease of 1.16% week-on-week; the profitability of steel mills was 35.93%, a decrease of 0.43% week-on-week; the average daily pig iron output was 2.292 million tons, a decrease of 31,000 tons week-on-week; and the daily consumption of imported iron ore by the sample steel mills was 2.8327 million tons, a decrease of 18,000 tons week-on-week. Last week, steel mill operations showed a slight decline. The decrease in steel mill profits dampened their enthusiasm for production. Although some steel mills are expected to resume production next week, the weaker-than-expected finished steel sales may lead to further declines in steel mill profits, negatively impacting demand.  Therefore, it is expected that the demand for iron ore will continue to decrease next week.

Regarding scrap steel, prices trended weaker last week. Scrap steel prices declined slightly last week, mainly due to weak demand for finished steel products. The pressure on finished steel prices led to reduced profits for steel mills, resulting in decreased production activity. This negatively impacted scrap steel demand, causing a slight decline in scrap steel prices. Prices were adjusted in some regions. It is expected that the scrap steel market will fluctuate within a narrow range next week.

Market Outlook:

In summary, SunSirs’ data analysts believe that the fundamentals of the iron ore market are expected to weaken overall next week. On the supply side, global shipments will remain at high levels with some fluctuations, and arrivals at ports will increase slightly month-on-month. On the demand side, steel mills will continue to reduce production, and pig iron output is expected to decline further. On the inventory side, port inventories are expected to enter an accumulation cycle. Given the increase in supply, decrease in demand, and rising inventories, iron ore prices lack upward support and are expected to continue their weaker trend.

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