After top steel producer in the world China hinted that its mills will continue to operate at a quick pace, iron ore prices saw a rise last week, the highest in more than three weeks. This even as the supply of steel remains curbed.
Meanwhile, the most traded item steel contract on China’s Dalian Commodity Exchange closed by trading at 5.9% a tonne. This is way higher after the biggest jump since May 19. The climb is expected to continue into the second week consecutively. The Platts 62% iron ore benchmark stood at an average $205.70 per tonnes CFR in May and $217 a tonnes on June 10.
The extended gains sentiment of the iron ore futures remained high thanks to the strong demand from the steel giant China, a senior commodity strategist told a leading news agency.
Weekly shipments reduced
The iron inventory port in China saw a four-month low in the recent past when the weekly shipment arrivals greatly reduced.
Reports show that stocks at 184 Chinese steel mills stood at just more than 6 million tonnes. This was 2.7% more than last week due to the hike in output. The report was published on the basis of a survey done.
The price hike was also due to the worries regarding the tight global iron ore supply. The iron ore port inventory meanwhile saw a four month dip last week as the weekly arrival of shipments fell.
The supply concerns continue as Brazil’s Vale SA stopped production at two mines. A dam in the country also has been decommissioned after safety concerns were raised over its operations.
A senior commodity strategist analysing the situation has said that these factors could further decelerate the recovery in iron ore output in Brazil.
A research note released by S&P Global Platts has revealed that though the iron ore exports from the big producers showed improvement in May, Rio Tinto and Vale will have to make efforts to raise the run rates over the latter half of the year to meet the sales guidance.
On analyzing data by S&P, shipments from Rio Tinto, Fortescue Metal Group and others touched 99.4 million tonnes in May. This is the highest so far this year – a rise of 7.8% month on month and hike of 3% year on year. Meanwhile, Vale predicts its iron ore production to stand between 315 million to 335 million tonnes in 2021.
The S&P Global Platts after a deep analysis of the Vale export has revealed that Vale is quite behind when it comes to meeting the guidance as it exported iron ore at an annual run rate of 251.7 million tonnes. What should also be taken into account here is that it sells around 25 million tonnes of iron into the Brazilian market.