Iron ore prices slipped further amid Vale’s announcement and non-heating season in China.
The benchmark Iron ore fines 62% Fe (CME) slipped from the level of $93.44 (Day’s high on 16th April 2019) to the level of $92.96 as on 17 April. The prices also declined in China, with Dalian Commodity Exchange (DCE) Iron ore fines 62% Fe settled at RMB 621 (as on 17th April 2019), down by 1.82% as compared to its previous close.
The prices previously rose to the recent high of $93.79 (11 April 2019) amid supply constraint in the global market and high demand for steelmaking raw material in China. The production loss declared by the significant iron ore miners such as Vale, Rio Tinto, and BHP, raised concerns among market participants over a supply gap, which in turn, coupled with high demand from China, supported the iron ore prices.
China marked a decline in inventory of steel in both social and mills stockpiles, which in turn, supported the steel prices in China. The high steel prices and low inventory in China prompted domestic mills to procure more iron ore to take advantage of high steel prices in the domestic market, and the mills were expected by the market participants to produce the record output of steel in April.
However, in the recent event, few provinces in China marked a pre-heating season, due to which the mills' furnace activity got affected. This exerted pressure on iron ore prices via demand dynamics; however, the global supply concern provided a cushion to the prices and prevented any sharp fall.
But, in the recent announcement by Vale, the Brazilian behemoth, mentioned that the company received the permission to re-open Brucutu Mine, which was previously facing ban amid dam collapse in Brazil, which used the scarp ore from the Brucutu Mine.
The ban on Brucutu Mine was among the many reasons, which created the supply constraint in the global market initially and supported the prices. The news of re-opening of the mine eased off the market participants slightly over the concern of supply gap in the market, which in turn, exerted pressure on iron ore prices, and the prices noticed its second fall in the present week.
However, steel prices in China are still high, and the inventory is significantly less, which might prompt other steelmaking provinces of China to procure the raw material. Market participants need to monitor if this support the iron ore prices and thereby may keep a close eye on it to reckon the price direction further.
On an economic scale, the manufacturing activities along with industrial production are on a surge, which might keep the steel demand high for some time in the domestic market of China. On the other hand, the trade talks between the United States and China, which initially exerted tremendous ripple effect in the global economy previously, are progressing well, as per the comments from the delegations involved in the trade talks.
The positive effect of trade talks could be reflected in the second quarter of the year 2019. It is to be seen if this supports the steel demand in global market thereby support the iron ore prices.
However, the supply chain and the stance of other iron ore miners also need to be monitored to decide the future movement in the commodity along with the demand dynamics in the global market.
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