Iron ore prices increased to $91/t on expectations of quarantine easing in China

January iron ore futures on the Dalian Commodity Exchange for the week of October 28 – November 4, 2022, rose by 6.1% from the previous week – to 662.5 yuan/t ($91.35/t). Thus, iron ore quotations rose for the first time in four weeks. This is evidenced by the data of Nasdaq.

December iron ore futures on the Singapore Exchange rose to $86.2/t, which is 9.4% more compared to November futures as of October 28, 2022.

The increase in iron ore prices in Dalian and Singapore began in early November. At the same time, on October 28-31, futures continued to fall, ending the month with indicators of $83.3/t on the Dalian Exchange, and $77.9/t on the Singapore Exchange, which is 30% and 50% less than this year’s highs.

The fall in iron ore prices in October 2022 was driven by an unexpected decline in plants activity in China, adding the gloomy market outlook for the world’s largest steel producer. The real estate market also continued to fall despite expectations of a recovery in the sector.

Already since November, the trend of falling prices for iron ore has turned in the opposite direction. Market sentiment changed as China’s regulator reassured investors that economic development remained a priority and pledged to maintain stability in the domestic currency and property markets.

The growth of the iron ore market was also influenced by data on a 13% drop in iron ore exports from Brazil in October compared to a year earlier. In addition, it is expected that China may abandon its strict policy of zero spread of COVID-19 as early as next year. The authorities later denied this news, but it did not affect the market trend.

The decrease in demand for steel counteracts the upward trend in iron ore prices. Against the background of a decrease in sales in October, steel enterprises planned for November technical maintenance of capacities and reduction of production. This may negatively affect demand until the end of the year.

Despite a positive trend in early November, basic iron ore futures are expected to the end of the year at their lowest level in 3-4 years as China and Europe cut steel production and prices increase due to oversaturation of the market with the supply of raw materials.

As GMK Center reported earlier, in January-September 2022, China’s steelmakers decreased import of iron ore by 2.3% compared to the same period in 2021 – to 822.54 million tons. In September 2022, China imported 99.71 million tons of ferrous metals, which is 4.3% more year-on-year.

China is the largest producer of steel in the world. In 2021, Chinese steelmakers reduced steel production by 3% compared to 2020 – to 1.03 billion tons. In 2022, the country plans to continue reducing production.