China’s steel output hits record, recovering iron ore prices

Iron ore prices rebounded on Monday because of China’s steel output hitting record highs.

In April, crude steel production increased to 97.9 million tons, setting a record for monthly and daily operating rates.

The strong production pace has also brought the year-to-date total to 375 million tons. It is an increase f o16% over the same period last year. Simultaneously, iron ore inventories at Chinese ports have fallen for the third consecutive week, indicating strong demand.

On Monday, the 62% benchmark grade iron concentrate imported from the northern region changed hands for US$217.77 per ton, an increase of 4.3%.

Fastmarkets’ 62% iron ore powder index was the most volatile week on record last week. After setting a new high of US$237.57 per ton on Wednesday, the index plummeted on Friday, with a record average daily loss of US$-28.78.

Compared with the seaborne trade, low-impurity brands bought and sold at Chinese ports are higher. It reflects the strong demand for immediate purchase of the most wanted chemicals.

Will Chinese steel production keep growing?

Analysts said that as China’s steel production continues to grow, steel profit margins are still rising. The supply of seaborne iron ore is still restricted too. Analysts believe that iron ore prices can still be maintained at near current levels by the second quarter. However, they may still increase.

Earlier last week, iron ore prices soared, prompting the authorities to further crackdown on the steel industry.

So far this year, futures prices for construction rebar and hot-rolled coil have risen by 32% and 38%, respectively.

The Dalian Stock Exchange has increased the trading limit for iron ore. The Shanghai Futures Exchange plans to increase the trading limit for deformed steel bar and hot-rolled sheet futures from Tuesday.

The global outlook of Fitch Solutions shows that from 2021 to 2025, iron ore mine production will increase by 2.4% while losing 2% in the past five years.

Compared with the production level in 2020, this growth will increase iron ore production 2025 by 378 million tons.

However, In the long run, production growth might stagnate. Analysts predict that production will peak around the middle of the decade, at about 1.05 billion tons.

BHP Billiton agreed in the economic and commodity outlook last August that iron ore demand will continue to rise.