WEEKLY: China's iron ore prices poised for more rises
Earlier last week, iron ore prices bottomed out following the slumps they recorded during the previous few weeks, Mysteel Global noted.
For example, Mysteel SEADEX 62% Australian Fines climbed to $108.8/dmt CFR Qingdao on March 22, $7.8/dmt higher than the nine-month-low the seaborne index touched a week earlier.
Spot prices for the commodity gained upward momentum from the strengthening of iron ore futures listed in China, sources pointed out, noting that derivatives prices reflected the moderately brighter view that market insiders hold regarding near-term iron ore demand.
Fundamentally, the retail stocks of finished steel in the country began declining last week, after the persistent accumulation witnessed during the winter off season for steel use, as reported, a trend perceived by market pundits as a belated revival in steel demand.
The inventories of five major finished steel products at the trading warehouses in the 132 Chinese cities Mysteel regularly checks had shrunk for the second week by March 21 to 28.1 million tonnes, thinning by a larger 3.4% on week compared to the prior week's 0.4% dip.
In the meantime, the slight improvement in steel demand and steel margins gave more steel mills the courage to lift their hot metal production after they'd spent weeks conducting maintenance on their blast furnaces.
Total hot metal output among the 247 Chinese steelmakers under Mysteel's monitoring reversed up from four weeks of falls to 2.21 million tonnes/day on average over March 15-21, though rising by a small 0.3% on week.
For this week, more steelmakers will continue to increase their hot metal output to capitalize on the thin steel margins they could enjoy after suffering losses for a long time, according to a ferrous analyst in Shanghai.
As a result, sentiment in the iron ore market will improve further, which should be a driver for China's imported iron ore prices this week, he added.
Nevertheless, downside risks may loom for ore prices afterward, the source warned, especially if higher steel output from steelmakers outpaces the actual recovery in steel demand and causes inventories to resume growing.
Written by Lea Li, liye@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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