As expected, iron ore prices have been restless across the first five months of 2022, which has been reflective of China’s wavering COVID-19 situation.
According to Mysteel, the price for 62 per cent Australian iron ore fines was trading as high as $US160.85 ($223.39) per dry metric tonne (dmt) at the port of Qingdao on March 8.
But a week later, the price had dropped to $US134.60/dmt – including a single-day drop of $US9.20/dmt on March 15 – as China imposed COVID lockdowns across many of its major commercial hubs.
After returning above $US160/dmt in early April, the commodity faltered again in May, dropping below $US130/dmt on stagnant demand from China and concerns surrounding the interest rate hike in the US.
Despite this, iron ore rebounded again with it trading hands at $US143.75/dmt on June 2. This came as Shanghai emerged from a two-month lockdown and China’s daily consumption of the commodity increased.
A Mysteel survey found that from May 26 to June 1, 64 Chinese steelmakers increased their intake of imported iron ore sintering fines to 559,300 tonnes/day. Prior to this, the average consumption for the commodity had been decreasing on average 2.8 per cent on week for three weeks.
This coincided with China’s port stocks reducing to an eight-month low. As of June 2, Mysteel found inventories of imported iron ore at China’s 45 major ports had dropped to 132.3 million tonnes – their 10th straight on-week dip.
This suggests that the demand is there, and one could expect prices to continue climbing as a result. In fact, Bloomberg has flagged that iron ore could be in for its biggest weekly gain in three months.
But the medium-to-longer-term outlook is somewhat muted, with Fitch Solutions forecasting demand stabilisation later in 2022.
“Our iron ore forecast for this year is $US120 a tonne,” Fitch told Australian Resources & Investment. “We hold onto that because we have expectations for demand stabilisation later this year from China.”