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On the whole, the demand recovered in east and north China before the Dragon Boat Festival, with a strong outlook on post-holiday production recovery. The average daily pig iron production has been at a high level, generating strong demand for iron ore.

SHANGHAI, Jun 7 (SMM) – Iron ore futures prices gained for the sixth consecutive trading day as of June 6, and the intraday contract once rose 3% to a high of 948 yuan/mt recorded on August 5, 2021. The contract retreated in afternoon trading, and finally closed the day with a gain of 0.65% at 925 yuan/mt.

In the spot market, transactions were sluggish as steel mills mostly stood on the sidelines. According to SMM Prices, PB fines in Shandong were mostly traded at 985-999 yuan/mt, up 5-10 yuan/mt from last week; the transactions prices in Tangshan were between 992-995 yuan/mt, an increase of 7-10 yuan/mt on a weekly basis. The prices of SSF in Tangshan stood mostly at 817 yuan/mt, up 10-15 yuan/mt week-on-week.

On the news front, in order to comprehensively enhance the advancement and modernisation of the industrial chain, and accelerate the construction of a new industrialisation base in the Bohai Sea region marked by knowledge-based, information-oriented, globalisation and ecologicalisation, the Tangshan Municipal Government has launched the Implementation Plan for the Further Upgrading of the Advanced Industrial Base and Modernisation of Industrial Chain in Tangshan City". The programme proposes that by the end of 2022, blast furnaces of less than 1,000 cubic metres and converters of less than 100 mt will be completely shut down.

On the fundamentals, the inventory across 35 ports tracked by SMM totalled 127.51 million mt as of June 2, down 2.17 million mt from the week before, and up 7.82 million mt year-on-year, marking the tenth consecutive session of declines WoW. The daily shipment from these ports added 55,000 mt on a weekly basis to 3.12 million mt, which is expected to rise further with the recovery of the manufacturing sector amid policy support. As such, the port inventory is likely to keep falling.

In addition, the blast furnace operating rates averaged 82.4% last week, down 0.77 percentage point WoW and 0.71 percentage point MoM, mainly because some furnaces in north-west and south China were overhauled. But the actual reduction in operating rates were less than expected as some mills that considered production cuts before maintained production in light of falling coke prices and stabilising finished products prices. Blast furnace operating rates are likely to remain stable.

On the whole, the demand recovered in east and north China before the Dragon Boat Festival, with a strong outlook on post-holiday production recovery. The average daily pig iron production has been at a high level, generating strong demand for iron ore.

The supply side was affected by heavy rainfall in Brazil, and there was a significant reduction in port arrivals. Overall shipments from Australia and Brazil are difficult to post a significant increase in the short term.

And taking into account the steel mill profits and policy regulation, iron ore price hike will be limited. Market players shall watch the recovery on the demand side and orientation of polices. It is expected that iron ore prices will remain high in the near term.