It seems that in all commodity markets in the field of commodities in international exchanges, there is an agreement on falling prices. The steady decline in iron ore prices is evident in all markets. The difference between the price of iron ore in iron goods with a purity of 65% and iron products with a purity of iron of 62% is small. This trend has declined rapidly in recent weeks. It seems that the drop in prices for pure iron ore has been more noticeable than low-grade samples. In the following, we will evaluate the Metal Bulletin report in this regard. Please be with Artan Press.
*** Unified drop in iron and steel prices in world markets
Market-active sources told Fast Market that the steady drop in iron ore prices has led to an irregular long-term outlook in the iron ore fine market. It is not possible to draw a clear picture of this. On the one hand, the Chinese government is suppressing the market with maximum pressure. On the other hand, this suppression of prices and low market demand will logically end very soon. It remains to be seen which group will be chosen in this tension. Expectations of declining demand for iron ore rose as signs emerged of the Chinese central government’s intention to halt production last July. The fact that it has reduced the prices of steel products, especially ferrous fines, has also somewhat reduced the speed of transactions in this area.
*** Downward outlook for iron ore demand on the Shanghai Stock Exchange
A trading source in Shanghai told Fast Market that the downward outlook for iron ore demand in the second half of 2021 has led to a rapid downward trend in prices and increased volatility. The steady drop in prices on the Shanghai Stock Exchange is quite evident. There seems to be a steady drop in prices throughout the market. This has challenged sales scenarios. Since July, weakened demand has dominated the iron ore market. Jane’s government intervention has pushed prices down. But compared to mid-range finches, high-grade fines have generated less buying interest. Because steel mills in China do not need to increase maximum steel production. As a result, the price of higher grades of iron ore has experienced a further decline.
*** Steady decline in steel prices in August
Sources noted that the increase in instability in August led to a sharp drop in prices. In August, limited physical trading was challenging, especially for high-end fines. This led to higher price corrections for premium iron ore. As a result, instability increased. This in turn contributed to a more stagnant outlook or even panic over demand for high-grade iron ore. This was acknowledged by a business source in Shanghai, which has even led to capital flows towards short positions and a kind of speculation in the futures market.
*** Significant difference in the price of high and low purity iron ore
The difference between the fast market index for iron ore is 65% from Brazil Fine, cfr from Chigdao port and 62% from Fine iron from the same port in the CFR trading format since July. This decrease last week has undergone changes following the increase in fluctuations. On August 23, the difference between the two indices reached $ 19.29 per ton, down 49% from the highest annual rate of $ 37.82 per ton. A trade source in Singapore noted that the steady drop in prices in the iron ore market is different from May. The market lost its rationale when the Chinese government announced that it would take measures to reduce high prices in the commodity market.
*** Severe repression of prices by the Chinese government
In May, the Chinese government, together with the China Iron and Steel Association, raised commodity prices as a major issue. They called on the steel industry to resist destructive competition to reduce price volatility. In the first half of 2021, the upstream steel market had a bullish outlook for iron ore demand and lower-than-expected supply. But this was not supported by the Chinese government. Therefore, we saw a steady decline in iron prices in world markets. Because steel mills were looking for maximum steel production. This cooled the market a bit, despite statements by the Chinese government in May
*** Decreased production and a steady decline in iron ore prices in the second half of the year
With the imminent decline in steel production in the second half of 2021, even with large market fluctuations, the downward outlook for iron ore demand is predominant. As a result of the sharp decline in the price of high-purity fines in the coming months is very likely. In the current pessimism about the demand for high-grade iron ore, the work in this area has become much more difficult. A steady drop in iron ore prices could divert the market from its true course. Contrary to this trend, a buyer source in northern China predicts that prices will rise in the coming months as the situation will not remain the same.
*** The possibility of increasing the supply of iron ore in Brazil
A third Shanghai source told Fast Market that the supply of Caracas fines from Vale Vale of Brazil is expected to increase in the fourth quarter. This can further reduce the price of high-grade iron ore. He predicts that the gap between Fine 65% and 62% will be reduced to $ 12 to $ 13 per ton by the end of 2021. Not everyone is so pessimistic. Another commercial source in Singapore said that steel margins, due to their positive correlation, are a key factor in the difference between the two degrees of purity of iron fines. A steady drop in prices could weaken the Brazilian market.
*** Ambiguity of the iron ore market trading route
With declining steel production and a steady decline in steel prices, steel prices are expected to continue to rise. This keeps the steel margins at a reasonable level. An important issue that is very influential in this market is the issue of premium costs. No matter how much the premium costs, I hope the market can look optimistic. The weekly fast market index for 65% of Qingdao port iron ore pellets in CFR trading format on August 20 was $ 207.74 per ton.
The product fell 33.9 percent from its highest annual rate of $ 314.50 per tonne on May 14. Edge base markets experienced price growth. The biggest January Coke futures deal on the Dalian Commodity Exchange reached its daily price cap on the morning of August 23rd. The contract hit a record high of 3,267.50 yuan ($ 504) during trading on Tuesday, August 24th.
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