“Ever-growing supply against the reduction in overall demand will see China’s iron ore market move into balance or a slight supply surplus,” MMAC said, adding that the changes may emerge sometime in mid- or late August.
Consequently, for the latter half of 2020, average seaborne iron ore prices may decline on year and the fluctuation will continue throughout the rest of the year with higher prices in July-August but lower prices in September-December, it shared. Prices would then spiral up towards the end of the year, as Chinese steel mills stock up iron ore for smooth production during the New Year celebration in early 2021.
As for the first half of 2020, the average seaborne iron ore pricing index almost leveled that for the first half of 2019, MMAC noted, which Mysteel’s pricing index confirmed, as the SEADEX 62% Fe Australian Fines averaged $90.9/dmt CFR Qingdao, or only $0.5/dmt short of the average for the first half of 2019, according to Mysteel’s data.
In H2 of 2020, the world’s top four iron ore miners will ship more iron ore, and for the whole year of 2020, their iron ore supply may increase by 25-30 million tonnes on year, while demand both from China and other countries may decline during July-December, according to MMAC’s prediction.
Blast furnace capacity utilization among the Chinese mills has reached its upper limit, and pig iron output for the third quarter of this year may remain high but will probably decline in the fourth quarter due to steel production restrictions for winter, according to the association.
Out of China, pig iron output from the rest of the world may improve but by a limited degree during the current half, MMAC noted, and over January-May, pig iron and direct reduced iron output decreased by 28.2 million tonnes in the countries other than China, it added.
For the whole 2020, China’s iron ore imports may hit a new record high of 1.1 billion tonnes – or 40 million tonnes higher on year – because of higher shipments from the top four, as well as tonnage rerouted to China from other countries, the association predicted.
For the first half of 2020, China imported 547 million tonnes of iron ore over January-June, or up 48 million tonnes on year, according to Chinese Customs data, and MMAC’s projection indicates a 3.8% on-year growth in China’s iron ore imports for the whole 2020, which will be smaller than the 9.6% on-year growth witnessed during the first half, Mysteel Global noted.
For the rest of 2020, the biggest variable in iron ore supply to the worldwide – and thus to China – remains Vale, MMAC warned, saying that if the Brazilian miner hits its annual target, shipments from Vale will lead to a small surplus in the global iron ore market.
However, if the virus spread worsens in Brazil and India in the third quarter, then the seaborne iron ore prices may hover high with comparatively low inventories and amid recovering demand from the developed economies on their resumption of industrial and economic activities, the association pointed out.