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Amid volatility in most commodity markets, iron ore has been relatively stable over the past two months.
The price of benchmark 62% iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, ended at $96.10 a tonne on Sept. 30, down 3% from the prior week’s close.
But the price has been in a range of $95 to $120 a tonne for the past three months, having settled after spiking as high as $160.30 in the weeks after Russia’s invasion of Ukraine on Feb. 24.
China buys nearly 70% of seaborne iron ore volumes and accounts for about half of global steel output, making the state of its economy the key market determinant for iron ore.
However, the key indicators for iron ore remain fairly positive, with imports holding up, port inventories slipping, and steel output is set to recover.
China is likely to have imported 87 million tonnes of seaborne iron ore in September, according to estimates from Refinitiv, while commodity consultants Kpler pegged arrivals at a higher 95.17 million tonnes.
China’s port inventories of iron ore also declined in September, with data from consultants SteelHome showing they ended at 135.1 million tonnes in the week to Sept. 30, down from 143 million in the week to Sept. 2.
In prior years iron ore inventories have tended to rise in the third and fourth quarters as steel mills rebuild stocks following the period of peak steel demand during the construction season over the warmer months.
This suggests that steel producers may be active buyers in the coming months, especially if the emerging signs of stronger steel production continue.
China’s steel output rose 3% in August from a month earlier, reaching 83.87 million tonnes, for a daily figure of 2.71 million tonnes.
Official figures for September will only become available around mid-October, but anecdotal reports from industry sources suggest daily output may rise to close to 3 million tonnes a day.
The capacity utilization rate at steel blast furnaces in China have gained over the last eight weeks to reach 89.08% as of Sept. 23, the highest since June, according to data from a consultancy.
Steel rebar inventories monitored have also been dropping in recent months, sliding to 4.59 million tonnes in the week to Sept. 30.
While the typical seasonal pattern is for rebar stockpiles to drop during the construction season and then rebuild over the winter, it’s worth noting that they are currently 32.3% below the level that prevailed at this time last year.
This suggests that steel mills may well continue to operate at relatively high capacity in order to boost inventory levels.
Of course, much will depend on whether steel demand receives an actual boost from stimulus measures.
mining.com
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