SunSirs: With Winter Stockpiling Slowing Down, Iron Ore Prices May Fluctuate Within a Narrow Range

Price trend

According to the commodity price analysis system of SunSirs, iron ore prices fluctuated upwards last week (January 23-30, the same below), showing a strengthening trend. As of the 30th, the SunSirs' iron ore price index was 811 points, a decrease of 0.56% compared to the previous week, as shown in the chart above. Last week, iron ore prices fluctuated downwards, showing a weakening trend. The main reason was that the ferrous metals market showed a "macro-driven, finished product-led" pattern last week. In the first half of the week, precious metals rose independently, highlighting safe-haven demand and expectations of interest rate cuts, while industrial products were constrained by weak fundamentals. In the second half of the week, positive macroeconomic factors (such as real estate policies) stimulated optimistic sentiment across the market, but structural differentiation was significant: demand expectations drove finished products to rebound first, while the slow recovery of pig iron production suppressed actual demand for raw materials. Iron ore and other raw materials only followed the rise in finished products, with the market driven by "strong expectations" rather than active inventory replenishment by the industry. The core contradiction lies in whether the positive policy signals can translate into a solid recovery in demand.

Market Analysis

Regarding inventory, as of January 30th, the imported iron ore inventory at 45 ports nationwide was 170.2226 million tons, a week-on-week increase of 2.5573 million tons; the average daily port throughput was 3.3231 million tons, a week-on-week increase of 0.2158 million tons; and the number of vessels in port was 109, a week-on-week decrease of 13. The iron ore port inventory situation last week is shown in the chart above; the total imported iron ore inventory of steel mills nationwide was 99.6859 million tons, a week-on-week increase of 5.7977 million tons. Last week, steel mill profits declined, and pig iron production remained relatively stable with only a slight decrease. Because steel mills released their pre-holiday inventory replenishment demand, port throughput increased. Last week, port inventory accumulated significantly. Although winter stocking demand from steel mills was released, overseas shipments increased. The trend of port inventory accumulation is expected to continue next week, so close attention should still be paid to changes in port iron ore inventory.

On the supply side, as of January 26th, the total global iron ore shipments last week amounted to 29.783 million tons, a week-on-week increase of 485,000 tons; the total shipments from Australia and Brazil reached 23.943 million tons, a week-on-week increase of 1.476 million tons. Australian shipments totaled 18.374 million tons, a week-on-week increase of 1.493 million tons, of which shipments to China amounted to 14.876 million tons, a week-on-week increase of 978,000 tons. Brazilian shipments totaled 5.568 million tons, a week-on-week decrease of 18,000 tons. Last week, both Australian and Brazilian shipments increased slightly. The cyclical changes in overseas shipments from Australia and Brazil were mainly affected by seasons and weather. While short-term shipments may fluctuate, in the medium to long term, the iron ore supply remains ample. However, the industry is in its off-season until the end of the year, and iron ore shipments and arrivals may decrease next week, but the overall iron ore supply situation is still trending stronger.

In terms of demand, as of January 23rd, the operating rate of steel mills' blast furnaces was 79%, a week-on-week increase of 0.32%; the utilization rate of blast furnace ironmaking capacity was 85.47%, a week-on-week decrease of 0.04%; the profitability of steel mills was 39.39%, a decrease of 1.3% week-on-week; the average daily pig iron output was 2.2798 million tons, a decrease of 0.012 million tons week-on-week; and the daily consumption of imported iron ore by the sampled steel mills was 2.8096 million tons, a decrease of 0.094 million tons week-on-week. Steel mill operating conditions remained stable last week. Declining steel mill profits and stable pig iron production, coupled with poor downstream finished steel product sales, dampened steel mills' enthusiasm for production. While there was some demand for winter stockpiling from steel mills recently, the outlook for spot market transactions remains uncertain, making it difficult for steel mill profits to rise. This negatively impacts the release of steel mill demand, and 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 increase in scrap steel prices last week was mainly driven by the overall positive trend in the ferrous metals industry. 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, SunSirs’ analysts believe that the iron ore market next week may shift to a pattern of both supply and demand increasing, leading to inventory accumulation. The contraction in shipments and arrivals provides cost support on the supply side, but the decline in hot metal production and continuous inventory build-up at ports will limit upward price movements. Given the interplay of these bullish and bearish factors, and considering that winter stockpiling demand will gradually decrease, iron ore prices are expected to remain within a narrow range of fluctuation.

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