June 18, 2024

Slowdown in Chinese steel exports ahead

Iron Ore & Steel: Iron ore price slides on softer China outlook

  • The iron ore price is down sharply since the start of June. The delivered price of 62% Fe iron ore in North China (TSI) closed at $106.42/t on 12 June, down by $11.10/t net since the end of May. The recent slide in the iron ore price reflects an expected correction after the price outperformed wider steel sector pricing in late May combined with negative demand signals from the industry. Crude steel output at CISA member mills slowed in late May and there are unconfirmed rumours that Chinese authorities will enforce an annual steel production cut of up to 20 Mt, equivalent to around 27-28 Mt of iron ore demand.
  • Chinese steel product exports maintained their exceptional strength in May, with shipments of 9.63 Mt the second highest (after March) since July 2016 and up by 1.27 Mt (+15.19%) y/y. However, it remains our view that this pace of trade cannot be sustained for the long term. The seasonal upturn in crude steel production that followed the end of Chinese New Year celebrations has seen supply significantly outpacing domestic demand and prompted the surge in exports. At 44.66 Mt, January-May shipments were 8.29 Mt (+22.79%) ahead of the same five months last year. This exceptional pace in Chinese steel exports has prompted a number of countries to look at barriers to protect their domestic producers, measures which should slow the pace of Chinese trade.
  • After four consecutive weekly increases, iron ore exports from Brazil retreated to a four-week low of 6.44 Mt in the seven days ending 11 June, down by 0.47 Mt (-6.80%) y/y. This reflected a slowdown in shipments from Ponta da Madeira, Porto Sudeste and, Tubarao. However, this short-term slowdown represents only a modest dip from the very strong pace of exports in the first half of this year. At 140.72 Mt, January-May exports were 6.2 Mt (+4.61%) ahead of the same five months last year. Initial strength was provided by the delayed arrival of seasonal rains however, shipments have since climbed higher still with May (30.99 Mt) a year-to-date high.

Iron ore price slide, 62% Fe CFR North China TSI ($/day)


Source: MarketView

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