Iron ore price bounces back on strong demand and shipment doubts

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were changing hands for $175.96 a tonne, up nearly 1.38% from Friday’s trade.

Capacity utilization rates at 247 furnaces across China rose to 92.19% on February 19, from 90.94% before the Lunar New Year holiday.

Lower shipments from Brazil are supportive of iron ore prices, according to Brazilian XP Investimentos. In the week ended on February 21, Brazilian shipments decreased 8% WoW (5.5 tonne), following heavy rain in the north of the country.

The daily index for iron ore 65% Fe Brazil rose 1%, to $200 a tonne on Monday, an all-time high.

“High rain volumes at major ports will continue to represent a challenge for Brazilian players during 1Q. So far, Brazil is running below guidance,” the company said.

Ponta da Madeira – one of Vale’s main assets and one of the most important iron ore and manganese loading terminals in the world – registered a decrease of 38% in shipments WoW, to 2,404 tonnes.

In January, a fire hit pier 4S shiploader at Ponta da Madeira and repair could take months and impact Vale’s iron ore shipment capacity, a source familiar with the matter said.

Over the last week, the Brazilian National Meteorological Institute (INMET) issued warnings of intense rains in Maranhão.

Vale did not respond to requests for comment on the impact of the rain on shipments.

“For Australia, the decrease of 15% (15,486 tonnes) in shipments in the week was a result of lower performance in Port Hedland (8,315 tonnes). However, it is still above the guidance,” XP said in a note.

“For this week we believe shipments might keep the pace above the 14 tonne level, with no news about [a] potential storm/cyclone.”

Supply and demand outlook
Global iron ore production growth will accelerate in the coming years, bringing an end to the stagnation that has persisted since iron ore prices hit a decade-low average of $55/tonne in 2015, market analyst Fitch Solutions said in its most recent report.

“We forecast global mine output growth to average 2.4% over 2021-2025 compared to -2.0% over the previous five years. This would lift annual
production by 378m tonnes in 2025 compared to 2020 levels, roughly the equivalent of India and Russia’s combined 2020 output.”

The market researcher forecasts global steel production to grow by 4.9% in 2021 after contracting by 0.1% in 2020.

“This will be driven by 7.5% growth in steel production in China and 6.2% growth in India, the two largest steel producers. Looking further ahead, we expect global iron ore consumption to steadily slow over subsequent years,” Fitch said.