SunSirs: With Supply Exceeding Dmand, Iron Ore Prices Were More Likely to Fall Than Rise, and Fluctuated Narrowly

Price trend

According to the commodity price analysis system of SunSirs, iron ore prices fluctuated upwards last week (January 3-11), showing a strengthening trend. As of January 11, the SunSirs iron ore price index was 836.11 point, a 2.2% increase compared to the previous week, as shown in the chart above. Last week, iron ore prices continued to fluctuate upwards and strengthen, mainly due to the current market being in a state of conflict between "strong expectations and weak realities." The improving macroeconomic environment supported market sentiment, leading to a high-level, upward-trending price. However, pressure from the industrial side was becoming prominent: finished steel faced a contradiction of strong supply and weak demand, and factory inventories were higher than expected; iron ore port inventories had accumulated to 170 million tons and the trend remained unchanged, leading steel mills to be cautious in their procurement. The pressure of the off-season in the fundamentals had shifted market sentiment towards caution.

Analysis and Commentarys

Regarding inventory, as of January 9th, the imported iron ore inventory at 45 ports nationwide was 170.4444 million tons, an increase of 3.2265 million tons compared to the previous week; the average daily port throughput was 3.3696 million tons, a decrease of 32,500 tons week-on-week; and the number of vessels in port was 119, an increase of 10 vessels week-on-week. The iron ore port inventory situation last week was shown in the chart above; the total imported iron ore inventory at steel mills nationwide was 89.8959 million tons, an increase of 430,500 tons week-on-week. Last week, steel mill profits declined, and although pig iron production recovered, steel mills intentionally slowed down demand release, resulting in a decrease in port throughput. Last week, port inventory accumulated significantly; 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.

On the supply side, as of January 5th, the total global iron ore shipments last week amounted to 32.137 million tons, a decrease of 4.634 million tons compared to the previous week. Total shipments from Australia and Brazil reached 27.427 million tons, a decrease of 3.169 million tons week-on-week. Australian shipments totaled 19.396 million tons, a decrease of 1.741 million tons, with shipments from Australia to China reaching 16.153 million tons, a decrease of 2.523 million tons. Brazilian shipments totaled 8.032 million tons, a decrease of 1.427 million tons. Last week saw a significant reduction in shipments from both Australia and Brazil. The cyclical changes in overseas shipments from Australia and Brazil are mainly influenced by seasonal factors and weather conditions. While short-term shipments may fluctuate, the iron ore supply is expected to remain ample in the medium to long term. However, the industry was temporarily in a low season until the end of the year, and iron ore shipments and arrivals are expected to continue to decrease next week, although the overall iron ore supply situation remained relatively strong.

capacity utilization rate of blast furnace ironmaking was 86.04%, a week-on-week increase of 0.78%; the profitability of steel mills was 37.66%, a decrease of 0.44% week-on-week; the average daily pig iron output was 2.295 million tons, an increase of 20,700 tons week-on-week; the current daily consumption of imported iron ore by sample steel mills was 2.8328 million tons, an increase of 26,100 tons week-on-week. This week, the operating rate of steel mills continued to decline. The decline in steel mill profits dampened their enthusiasm for production. Although some steel mills may resume production next week, the spot market transaction situation is uncertain, and steel mill profits may further decline, negatively impacting demand from steel mills. It is expected that iron ore demand may slightly decrease next week.

Regarding scrap steel, prices fluctuated within a narrow range last week. The slight upward movement in scrap steel prices was mainly driven by the overall positive trend in the ferrous metals sector. However, weak demand for finished steel products and downward pressure on finished steel prices led to declining profits for steel mills and reduced production activity. This negatively impacted scrap steel demand, limiting the upward potential of scrap steel prices. Some regions saw price adjustments. It is expected that the scrap steel market will continue to fluctuate within a narrow range next week.

Market Outlook 

In summary, according to SunSirs’ data analysts, the iron ore market is expected to maintain a high-level volatile trend next week. On the supply side, global shipments are expected to decrease slightly week-on-week, while arrivals at ports will remain at high levels. On the demand side, national pig iron production will decrease slightly week-on-week, limiting purchasing opportunities. Port inventories continue to accumulate, exceeding 170 million tons. The supply-demand structure remains relatively loose, but supported by positive macroeconomic expectations, the downside potential for iron ore prices is limited, and fluctuations are expected in the short term.

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