Asian iron ore prices face continued pressure amid subdued demand: S&P GCI

New Delhi [India], January 19 : Seaborne iron ore prices are unlikely to stage a near-term rebound, remaining under pressure due to subdued procurement demand and challenges in finished steel output margins, according to market sources.
Platts assessed the 62 per cent Fe Iron Ore Index at USD 127.65/dry mt CFR North China on January 17, marking a decline from the 19-month high of USD 143.2/dmt observed on January 2, as per S&P Global Commodity Insights data, according to S&P Global Commodity Insights (GCI).
The completion of pre-holiday replenishment by certain steel mills has resulted in weakened demand for iron ore.
Some Chinese steel mills have extended blast furnace maintenance durations, particularly in Shanxi and Hebei provinces, considering sluggish margins.
Seaborne restocking activities for early to mid-February delivery cargoes, typically observed ahead of the Lunar New Year holidays, have fallen short of expectations.
This has contributed to a downward price re-adjustment in the iron ore market. Some mills are conducting regular maintenance, while others are doing so due to weak margins.
The duration of maintenance varies, lasting between 10 to 15 days for each mill. Thinning margins are prompting caution among buyers, impacting inventory management and seaborne purchases. Thinning margins in the steel industry have led to increased caution among buyers in managing inventories.
This cautious approach is affecting seaborne purchases, contributing to a loss of momentum in iron ore prices. Seaborne prices above USD 140/dmt CFR China in early January were deemed unsustainable, leading traders and end-users to step back from spot purchases.
Market participants are now observing how end-of-February delivery cargoes will fare. A Chinese steel mill indicated that winter restocking is almost 70 per cent complete and the requirements for spot iron ore procurement are limited.
The cost-competitiveness of generating scrap compared to pig iron production is influencing procurement decisions.
Despite support from low iron ore port stocks, strong pig iron output, and positive macroeconomic factors related to government infrastructure support, further upside on prices in Q1 2024 is expected to be limited. Mills may prioritise cost-effective raw materials, focusing on medium-grade fines or those with a lower Fe content.
Market participants are closely monitoring developments in steel production, blast furnace maintenance, and macroeconomic factors to gauge the trajectory of iron ore prices in the coming months.
The delicate balance between supply, demand, and economic conditions will shape market dynamics in the near term.