Iron ore prices recover from late July downturn

September futures for iron ore, the most traded on the Dalian Commodity Exchange, for the period July 26 – August 2, 2024 increased by 2.6% to 783.5 yuan/t ($108.28/t), according to Hellenic Shipping News.

On the Singapore Exchange, quotes for September futures as of August 2, 2024, rose by 3.1% compared to the price on July 26 to $102.85/t.

The iron ore market suffered a significant drop in late July amid weaker steel demand and increased stocks of raw materials in Chinese ports. Quotes fell to their lowest level since April this year, with prices hovering around $99/t on the Singapore Exchange and $104/t – on the Dalian Exchange.

At the same time, in early August, the market recovered slightly due to better-than-expected fundamental data in the industry and hopes for the introduction of stimulus measures after several important government meetings. However, the positive trend was restrained by unfavorable weather conditions.

During a meeting of the Chinese Politburo, officials decided that the stimulus measures needed to achieve this year’s economic growth target (+5% y/y) would be aimed at expanding domestic demand, which deviates from the usual scheme of injecting funds into infrastructure projects.

The government’s announcement of its intention to stimulate consumer spending provides only temporary support to China’s steel industry, at a time when the market was expecting large-scale economic stimulus.

«However, we remain highly skeptical about any long-term impact of these incentives on a significant improvement in domestic steel and iron ore consumption due to the significant challenges in the country’s construction and real estate sectors,» said Cameron Lowe, an analyst at Navigate Commodities.

Despite a number of negative factors, prices recovered to a one-week high after the publication of an optimistic forecast for iron ore demand in China from the leading mining company Rio Tinto. In particular, the company reported strong earnings for the first half of 2024 and expects to improve consumption of raw materials in the second half of the year. Rio Tinto’s CEO notes that China’s “green” transition will boost consumption of high-quality ore. In addition, China’s lower-than-expected economic data for the second quarter increased market hopes for additional incentives for steel consumption.

The British international commercial bank HSBC Holdings expects iron ore prices to reach $100 per tonne in 2024. Capital Economics predicts that quotations for this raw material will range from $99-100/t. By the end of next year, iron ore prices will fall to $85/t.