Iron ore (CME) prices fell from its recent high of US$94.75 (Day’s high on 7th May 2019) to the present level of US$94.15 (as on 9th May 2019 GMT-4 2:46 AM), down by 0.004% as compared to its previous close. The prices on the Dalian Commodity settled at RMB 643 (as on 8th May), down by 1.38% as compared to its previous close, which was high amid a ban on Brucutu Mine.
The prices previously rose over the suspension of Vale Brucutu Mine. However, the fundamentals of high supply and lesser demand reined the prices and the prices dropped which in turn, marked a second consecutive fall in prices after the suspension of Brucutu Mine by the court of Minas Gerais.
The iron ore prices are currently stagnant, as market participants are waiting for the ambiguity of fundamentals to get clear from the market. The market participants are currently holding the judgement as the factors which are moving against versus those moving in favour of the commodity are quite balanced.
Fundamentals of the market:
Factors in Favour:
The factors which are supporting the iron ore prices are the high steel prices in China, which is prompting steelmakers to ramp up the production to take advantage of high steel prices in the domestic and global market. The steel demand in China remained high and the output in the first quarter of the year 2019 expanded substantially. As per the data from Ministry of Industry and Information Technology (MIIT), the crude steel production stood at 231 million metric tonnes in the first quarter of the year 2019, up by 9.9% as compared to the previous corresponding period.
Despite the high production in the first quarter, the high domestic consumption led to a decline in social and mills steel inventory in April, which in turn, further prompted the mills to increase the output. The steel prices in China are currently high.
The factor which is now exerting pressure on iron ore prices is the increase in iron ore shipments and a falling rate of decline in inventories, amid production halt in major steel producing provinces in China such as Tangshan due to environmental concerns.
The re-escalation of the tariff war is expected by the market participants to put pressure on global steel demand scenario which in turn, is stopping mills from jumping into the high production at the current moment.
A factor which is contributing to the current stagnancy is that the mills in China are currently holding ample stockpiles of iron ore and are procuring less amid high prices of the commodity in the market.
The freight rate from Tubarao and Western Australia Ports further declined. The freight rate from Tubarao port settled at U$14.54 (as on 7th May) a tonne, down by 7.09% as compared to the rate of US$15.65 on 6th May.
The freight rate from the port of Western Australia also nosedived to close at US$5.96 (as on 7th May) a tonne, down by 5.05% as compared to the previous close of US$6.58 a tonne.
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