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The rapid recovery of the steel market in China leads to a drop in iron ore prices

Ukraine / Analytics
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Contradictory situation in the commodities market, "China" develops as a result of the redirection of ore supply from the US, EU and Japan to China where it grows its surplus and falling prices.

The rapid recovery of the steel market in China leads to a drop in iron ore prices

while the stock price of iron ore in China are growing rapidly and gets to the psychological mark of $ 90, the spot price of iron ore fines falls $ 2 to $ 85 per ton. Speculators assume market recovery in steel consumption and continued growth in its production despite quarantine restrictions and the physical market shows signs of excessive sentences.

Although the Chinese iron and steel Association expects a gradual recovery of domestic steel demand, it also warns about the pressure on exports of steel products in this quarter, because the coronavirus is spreading to key markets.

According to the world steel Association, production in Japan declined to a 10-year low in the 2019-20 financial year to 31 March, while the production in April-June 2020, according to forecasts, will decrease by 26% compared to the previous year. Steel producers in the EU announced a reduction of up to 20% of steel production. India, a key exporter of pellets, also predicted the sharp decline in steel demand.

the producers of iron ore reported a sharp reduction of production and supply, which means the shift to China.

According to the American Bank Morgan Stanley, in 2019, Europe, Japan and South Korea imported about 300 million tons of iron ore, accounting for about 20% of marine supplies.

If the rate of decline of steel production in the world will be comparable with the financial crisis of 2008, when the production reduced by 30% in Europe, 26% in Japan and 9% in South Korea, which led to the reduction in iron ore imports to 109 million tons, or 32%, in 2009, the Bank said.

According to forecasts, these levels of reduction can result in sending an additional 15 million tonnes of iron ore to China from Europe and Japan later this quarter.

Recall that the largest mining-metallurgical enterprises of Ukraine "ArcelorMittal Kryvyi Rih" has already started to supply iron ore to China by sea and planiruet to increase the volume of shipments up to 300 thousand tons per month.

Share of China in exports of iron ore from Ukraine in the first quarter of 2020 has increased by more than 2.5 times – up to 52%.

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