Iron ore

Positive dynamics were facilitated by the intensification of demand in China after the national holiday

September iron ore futures, the most traded on the Dalian Commodity Exchange, rose 2.2% from the previous week – up to 822 yuan/t ($113.35/t) for the June 23-30, 2023 period. This is evidenced by Nasdaq data.

On the Singapore Exchange, quotations of basic August futures as of June 30, 2023, decreased by 0.9% compared to the price a week earlier – to $110.75/t.

Iron ore prices were supported last week by stockpiling by some Chinese steel mills after the holidays, as well as expectations of further economic stimulus in China. These factors have boosted traders’ confidence that demand for commodities will improve in the short term.

Recently, Chinese Premier Li Qiang said at the World Economic Forum Summit in Tianjin that the government will soon introduce effective policy measures to support domestic demand. Before the announcement, China’s National Development and Reform Commission called on financial institutions to expand medium- and long-term lending to the manufacturing industry.

«The high level of pig iron production combined with insufficient supply of steel scrap has provided relatively strong support for iron ore consumption,» Huatai Futures analysts said.

Prospects for growth in iron ore prices are currently limited due to falling steel prices and low margins for steelmakers. In addition, at the end of the week, data on Chinese industrial profits for January-May was published – this indicator fell by 18.8% y/y, which also negatively affected sentiment.

However, in the short term, iron ore prices may rise slightly, as the effect of already implemented economic incentives has not yet been fully reflected in the market. At the same time, the decrease in steel prices and the low profits of steelmakers will contribute to limiting the production and consumption of raw materials in the future.

As GMK Center reported earlier, iron ore imports to China in January-May increased by 7.7% y/y – up to 480.75 million tons. In May, China imported 96.17 million tons of iron ore, which is 3.9% more compared to May 2022, and 6.3% more than April 2023.