Chinese iron ore prices rose above $100/mt cfr China for the first time in the last 10 months. Late last week, Australian iron ore fines 62pc Fe jumped by $4.25/mt to $101/mt cfr China after the futures on the DCE surged by CNY41.5/mt ($5.8/mt), learnt Davis Index.
Industry participants expect that higher iron ore prices could encourage blast furnace-based steelmakers to use more ferrous scrap and EAF makers to increase production in the coming days. Thus high iron ore prices could increase ferrous scrap use and help scrap prices to remain high, said traders.
Leading iron ore miner Vale reported COVID-19 infections among its workers in Itabira, in the southern state of Minas Gerais and other mines in Para state. Growing concerns over disruption of supplies from Brazil due to the pandemic resulted in the rise of export offer prices. Vale managed to reverse a court decision closing mines in the north and south because of rising numbers of COVID-19 infections. Both these mines are the one’s producing Vale’s highest quality iron ores, which are exported.
Iron ore prices were already on an uptrend in China following the spike in futures prices and supply fears, demand upsurge, and costlier steel. Through May, iron ore prices rose by around 24pc. Iron ore futures were driven by a sharp drop in iron ore inventories hitting around 3 years low.
In China, low-quality lumps demand has improved since output restrictions were announced in Tangshan for June. In order to meet emission standards, many sintering plants, BF steelmakers have scaled-down productions, while some re-rollers were ordered to cut operations by 50-100pc. These restrictions pushed steel prices up in China.
Outlook for June month’s steel demand in China remains uncertain. It is being expected that overall Chinese consumption of steel in June could be hit by seasonal issues and heavy rains. Also, more steel supply globally could weigh on downstream production outputs.