Stockpiles of iron ore at 25 major Chinese ports declined in the first week of August as market demand began to pick up. Inventories of imported iron ore stood at 72.83Mt from July 30 to Aug. 5, down 2.25Mt, or 2.9%, week on week.

The price index for 63.5%-grade iron ore imports dropped 2 points from the previous week to 131. The index for 58%-grade iron ore also shed 2 points to 115. Iron ore prices are not expected to drop in the long term, because steelmakers still have a large demand for raw materials. A rebound in imported iron ore prices is likely to occur in September, the traditional peak season for consumption.

Iron ore futures fell persistently and underperformed the spot market in the week amid prudent and wait-and-see attitudes. Affected by choppy and downward futures prices, prices of some iron ore products on the spot market dipped but the decline was small due to support from traders.

Currently, iron ore prices are approaching the cost line, which is likely to dampen iron ore enterprises’ enthusiasm in production and supply. In the meantime, low inventory level of steel mills and a significant fall in port stocks are favourable for a rebound in ore prices.

In the second half of this year, Chinese steel mills have a small possibility to actively cut production and are likely to maintain their rigid demand for raw materials, which will help check a further fall in iron ore prices.

Source: China Metals e-mail