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China’s imported iron ore prices could show a month-on-month decline in April due to sluggish recovery in steel demand, said commodity consultancy Mysteel in a latest report even though April is traditionally a strong month for domestic steel consumption as the final month of spring.
In March, the absence of any noticeable revival in steel demand exerted significant downside pressure on ore prices, the report noted. For example, Mysteel SEADEX 62% Australian Fines had tumbled to $97.8/dmt CFR Qingdao as of March 29, down by a total of $17.9/dmt on month.
Specifically, the weakness of steel demand resulted in steel stocks at both mills and traders swelling, forcing many steelmakers to scale back their hot metal production, as reported. When Chinese steel mills would normally be ramping up production during the peak season to meet resurging demand from construction companies and manufacturers, the cutback this spring is unusual.
Hot metal output among the 247 Chinese steelmakers Mysteel checks regularly fell to an average of 2.21 million tonnes/day during March 22-28 for an on-month decrease of 15,500 t/d. The output was also 9% lower than the level during the same period last year.
Despite this, Chinese steel mills are expected to gradually lift their steel output this month in anticipation of improvements in steel consumption, Mysteel’s report predicted, pointing out that should this happen, iron ore prices will rebound mildly in the early part of this month.
Nevertheless, the rise in steel output may outpace any increase in end-user steel demand, which in turn will decelerate the pace of destocking among the mills and turn market fundamentals negative. As a result, market sentiment will deteriorate leading iron ore prices to experience notable drops in turn, according to the report.
Meanwhile, although steelmakers’ demand for iron ore will likely rise in April amid their higher production of hot metal, the scheduled increase in arrivals of ore carriers at Chinese ports this month will result in a further accumulation of portside iron ore stocks.
The inventories of ore piled at China’s major 45 ports reached 144.3 million tonnes on March 28 for an on-month gain of 3.7% and making for the fourteenth consecutive weekly increase. Mysteel forecasts that by the latter part of this month, stocks will have risen above 150 million tonnes.
The story is jointly published by Yuan Talks and Mysteel Global.