Iron ore prices have experienced a sixth consecutive week of decline, reflecting ongoing difficulties in China's steel sector and a halt in rising port inventories. As of August 9, futures on the Singapore Exchange closed at USD 101.49 per ton, just above USD 100.14, the lowest in four months. Despite this small recovery, prices have decreased by 29% from a peak of USD 143.60 per ton reached in early January 2024.
The continued decline in iron ore prices signals a shift in market sentiment. Initial optimism that Beijing’s measures to revive its struggling construction sector would boost steel demand has given way to the reality of difficult market conditions. Steel mills are facing significant pressure on profits and sales, as reflected in recent price trends and data from the Chinese steel industry.
China, which produces more than half of the world’s steel, saw Shanghai rebar futures decrease to 3,286 yuan (USD 458.55) per ton, the lowest price since October 2020 and also a 20% decline since the beginning of the year. The China Iron and Steel Association reported that crude steel production at its member mills averaged 1.9735 million tons per day from July 21-31, 8.1% lower than the previous 10-day period. The industry association attributed the decline to weak prices.
Official steel production data for July, expected this week, is expected to confirm the continuing downward trend in 2024. The National Bureau of Statistics reported a 1.1% decline in crude steel production in the first half of the year, totaling 530.7 million tons compared to the same period in 2023. In addition, China’s steel PMI (Purchasing Managers’ Index) fell 5.3 points to 42.5 in July, the lowest level this year, indicating a contraction in the sector.
Despite the pressure on steel, iron ore imports have remained relatively stable this year amid restocking efforts. Port stocks rose from a seven-year low of 104.9 million tons in October 2023 to a 27-month high of 151.8 million tons on July 26, 2024. The latest data shows a slight decline to 150.4 million tons as of August 9, suggesting the end of the restocking phase may be near.
China’s iron ore imports increased by 6.7% to 713.77 million tons in the first seven months of 2024 compared with the same period in 2023. The 44.31 million ton increase closely mirrors the 46.9 million ton increase in port stocks since October. This trend suggests that steel mills and traders are taking advantage of lower iron ore prices to replenish their stocks.
Iron ore imports in August are expected to remain strong. However, the outlook for iron ore prices and import volumes remains cautious as steel production is falling and annual production is unlikely to reach last year’s 1.02 billion tons. Ongoing challenges in the steel sector and high inventory levels create uncertainties for future demand and pricing dynamics.
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