China restrictions calming iron ore market, prices down by USD 1.5/ton

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09 January 2017

Iron ore prices declined $1.5 per tonne through the week to end the last trading session at $77.60 per tonne CFR China for 62% Fe fines.

Dense smog in the northern part of the country forced provincial governments in Tangshan and Hebei to order steel mills to cut capacities upto 60% till further orders were issued. Mills are unhappy with the cut though to protect the environment they are obeying the orders.

This has resulted in iron ore inventories piling up at the mills and at the ports due slow movement of cargoes and reduced offtake.

Traders are expecting the prices to remain soft atleast till the holiday break coming up towards end January. Mills had recently been on a rapid spree to pile up iron ore stocks to kick start production in early 2017 but the smog and winter’s slow demand have paused their plans.

Iron ore prices are likely to swing between $74-78 per tonne atleast till early February till China returns from vacations as per the views of leading analysts and traders from Singapore and China who interact with KATM.