A Glimpse On Factors Supporting Iron Ore Prices

A Glimpse On Factors Supporting Iron Ore Prices

Iron ore prices are marking a surge amid falling China’s domestic steel inventories and building Iron ore ports stocks.

China’s domestic steel inventory fell by 4.46% to end at 17.71 million tonnes for the week ended 15th March 2019. The fall in domestic steel inventory prompted the domestic mills to replenish the inventory level, which in turn supported the iron ore prices as to refill, the falling inventory mills need to purchase the very basis raw-material of steel production, i.e. iron ore along with coking coal.

The Iron Ore Inventory across the 35 ports in China also increased by 0.41% and reported at 136.37 million tonnes, which in turn marked a high import across the Chinese ports and in turn supported the iron ore prices.

The uplifting of ban on the ports of Jingtang and Caofeidian further marked rise in deliveries from these ports. This signifies the demand of iron ore in the domestic market which further accounted for the gains in iron ore prices.

The DCE Iron Ore 62% Fines marked an increase of 5 yuan and closed at 632 RMB/t (as on 18th March 2019) on account of level demand for the iron ore.

The recent Vale ban which concerned the mills across China and global raw material investors and speculators over the supply constraint has marked its presence again. After the recent ban in the Brucutu mine in February 2019, the Brazilian miner faced another setback, when a Brazilian court ordered Vale to stop operations at Timbopeba mine on 15th March 2019. The previous ban which was estimated to create a production loss of 30 million tonnes from the giant miner now account for a loss of 42.8 million tonnes of production as the ban on Timbopeba mine is estimated to create a production loss of 12.8 million tonnes per year.

The Brazilian giant is in dark clouds with many bans imposed on different operations of the miner. The company’s iron ore production is in shackles, and international commodity markets are discounting all the factors and in turn raising the premium on iron ore prices.

The recent notification received by the Vale from the Mangaratiba city government in Rio de Janeiro to suspend the activities on port Guaiba Island terminal further created a concern on Vale’s ability to come out to the limelight anytime soon and in turn supported the concern of supply crunch in the iron ore market which is supporting the iron ore prices.

The Vale’s competitors such as BHP, Fortescue, and Rio Tinto have already realized high iron ore prices and received high sales proceeds from the commodity. With the absence of Vale and its bumper stocks of iron ore from the market, these competitive miners are ramping up and taking advantage of the loophole in the supply chain. All major competitor miners are expected to present their financial results in August and are in a dilemma to either distribute the cash reserve accumulated by the high sales proceeds or reinvest it.

The array of factors such as falling China’s domestic steel inventory, rising port imports of iron ore across China and supply disruption caused by bans on Vale’s operations are supporting the iron ore prices and favouring the balance sheets of those who are still in the business and using the supply loopholes to their advantage.


This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.

Join Our Discussion

Start discussion with value Investors for ASX Stock Market Investment and Opinion.

6 Cannabis Stocks under Investor’s Limelight…

Cannabis companies that sell both medicinal weed and recreational pot. Marijuana stocks to look at. Marijuana mergers and acquisitions. Dispensary data analytics. Upcoming marijuana IPO’s Those phrases have become increasingly common as marijuana legalization spreads.

Global spending on legal cannabis is expected to grow 230% to $32 billion in 2020 as compared to $9.5 in 2017, according to Arcview Market Research and BDS Analytics. As of June 29, 2018 the United States Marijuana Index, despite a lot of uncertainty around regulations, has over the past 1 year gained 71.49%, as compared to about 12% gain seen by the S&P 500.

Click here for your FREE Report