Iron ore prices inched up slightly in the international market as the mills in China completed the restocking program on 30th April 2019 ahead of labour day holidays in China that will remain till 4th May 2019. International Iron Ore fines 62% Fe (CME) climbed from the level of $93.16 (Day’s close on 29th April 2019) to the level of $93.24 (Day’s close on 30th April).
The iron ore prices rose in China for the second straight day, and the Dalian Commodity Exchange (DCE) Iron Ore fines 62% Fe closed at RMB 639.00 (as on 30th April), up by 0.79% as compared to its previous close.
The factor which supported the iron ore prices across the globe was the high steel prices in China, which prompted the mills to restock the raw material ahead of the holidays in China from 1st May 2019 to 4th May 2019.
The steel rebar prices in China’s domestic market were last reported at RMB 4130 per tonnes, and the hot-rolled coil (HRC) were at RMB 3980 per tonnes (As on 26th April).
However, the future prices of steel rose and were at RMB 3828 per tonnes on the Shanghai Future Exchange (SHFE). The prices of the future increased by 1.54% or by RMB 58 (as on 30th April), which was in line with the market expectations.
The market participants are expecting high prices of iron ore in the near future; the consensus estimates that the high steel prices coupled with the smog alert removal from Handan city in China by the government, would increase the iron ore demand in the near future.
In the recent event in China, the weather bureau of Handan city mentioned that the diffusion conditions improved in the Hebei provinces, which in turn, led the local government to lift the smog alert from April 30th.
China’s increased stance to curb environmental pollution led it to expand and relocate steel projects, and China decided to expose these projects to ultra-low emission standards. As per the report from the Chinese Ministry of Ecology and Environment (MEE), at least 60% of the domestic steel capacity should complete the renovation by the end of 2020, and by 80% till 2025. The stimuli provided by the Chinese government is expected by the market participants to support the prices of high grades iron ore in China over the medium-term.
As expected, the steel production picked up in April; however, the high domestic consumption despite fall in manufacturing activities for April, reduced the steel inventory in China by 0.74 million tonnes (last reported at 26th April), down by 5.05% to 13.82 million tonnes.
The reduced steel inventory is expected by the market participants to further prompt the mills to increase the production to take advantage of high domestic prices in the market.
However, the investors should not ignore the building supply chain, which might further come back to normalcy and balance the demand. To further reckon the direction the investors should consider the overall steel demand outlook in the global market.
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