Iron ore prices fell amid an increase in delivery of the commodity from Brazil. The benchmark CME futures plunged from its closing of $93.81 (Day’s close on 3rd May 2019) to the present level of $93.15.
As per the data, the eighty-seven vessels carrying 13.68 million metric tonnes of iron ore arrived across significant ports in China during the week from 22nd -29th April. Which in turn, marked an increase of delivery across Chinese ports by 454,000 metric tonnes.
Apart from a rise in arrivals from Brazil, the 35-port stocks also declined with a much smaller rate, which in turn, signifies fall in demand. As per the data, the iron ore stocks across 35 Chinese ports fell by just 60,000 metric tonnes and stood at 125.4 million metric tonnes for the week ended 3rd May 2019. The decline in inventory was much less when compared to a drop of 3.23 million metric tonnes for the week ended 26th April.
The slight decline in inventory was soon indemnified by the inventory increase at Caofeidian port; as per the data, the Caofeidian port inventory increased by 1 million metric tonnes for the week ended 3rd May.
The increase in shipment along with an increase in port inventories signifies an improvement in the supply chain, which could further exert pressure on iron ore prices if the U.S-China trade tension further escalates.
Apart from an increase in supply, the demand fell in China amid smog alert. The Chinese authorities and the government decided to put a curb on China’s steelmaking hub of Tangshan for May, which in turn, marked a decline in the procurement of steelmaking raw materials.
Other provinces in China also avoided the stocking of iron ore as the mills had procured ample stockpiles before the Chinese holidays, which in turn, decreased the procurement and demand of iron ore and exerted pressure on its prices.
The production curb by the authorities on mills in Tangshan province covers around 31 steelmakers in China with a combined capacity of 107.71 million metric tonnes, which in turn, could reduce the steel inventory further in China. However, as per the market consensus, the steel demand could get hamper from the recent tensions between the U.S. and China.
The spot market in China marked a poor iron ore trade on the first day after the holidays in China as pre-stocking before the holidays prevented further procurement in China. As per the market estimation, steel mills in Tangshan could face the stricter implementation of anti-pollution output curbs in May for the non-heating season. Due to which, some mills in the highest steelmaking provinces of China, as expected by the market participants, will put their blast furnaces under maintenance, which in turn, could hamper the iron ore prices further and exert pressure on it.
In a nutshell, the iron ore supply is again building strength; the steel inventory is further expected to decline due to the ban on Tangshan mills’ activities. However, the market participants should keep a close eye on the demand side, which as per the market consensus could get hamper if the U.S.-China trade tension further escalate.
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