Iron ore prices peaked after a 5-week rally

January iron ore futures, which are the most traded on the Dalian Commodity Exchange, for the period November 24 – December 1, 2023, slightly decreased compared to the previous week – by 0.2% to 975.5 yuan/t ($136.55/t). This is evidenced by Nasdaq data.

On the Singapore Exchange, quotes for January benchmark futures as of December 1, 2023, fell by 3.5% compared to the price a week earlier – to $129.6/t.

Last week, iron ore prices declined slightly due to market participants’ concerns about the negative consequences of China’s State Planner’s intervention in trade. For the second time, the agency said it would tighten supervision over the iron ore market and raw material stocks in ports to prevent hoarding and speculation and curb the rapid price increase.

Recently, China’s National Development and Reform Commission (NDMC) announced that it had held a meeting with representatives of the country’s major ports to assess port stocks of ore and tariffs for the storage of raw materials.

«The authorities believe that iron ore prices are out of line with supply and demand as the market reacts to the optimism stemming from the successful relief of the real estate market,» said a representative of Navigate Commodities.

In addition, the weakening of the steel market amid a seasonal drop in demand is also restraining the rise in iron ore prices.

“The decline in iron ore prices is partly due to the fact that steel prices failed to register more gains due to resistance from end users. Quotations are likely to remain within a narrow range in the short-term until there are other clear signals from the market, the start of winter stockpiling, or new macroeconomic stimulus,” Sinosteel Futures analysts said.

However, the fall in prices was limited due to market optimism about government support for the real estate sector. In recent weeks, a number of incentives for the real estate market have been unveiled, which have supported positive sentiment about future steel demand and commodity prices. Optimism for iron ore could increase if Beijing implements more structural reforms. China’s demand for steel for electric vehicles and green infrastructure is already supporting high average steel and iron ore prices, despite the decline in real estate.

As GMK Center reported earlier, analysts expect iron ore prices to rise to $150/t in the first half of 2024. Next year, prices will be supported by relatively limited supply and increased demand in China. In addition, demand for raw materials in India is expected to remain steady.