BEIJING, June 9 (Xinhua) -- Iron ore prices in China are expected to continue rising amid fluctuations in the short term, against the background of strong demand, low inventory, and tight supply expectations, Shanghai Securities News cited industry insiders as saying on Tuesday.
Brazilian miner Vale has recently suspended activities at the company's Itabira mining complex in Minas Gerais state, leading to rising expectations for tight supplies in the future.
The news shored up the iron ore futures traded at the Dalian Commodity Exchange (DCE) and the most active iron ore contract for September 2020 delivery gained 5.53 percent to close at 783 yuan per ton on Monday.
Vale said that the company's guidance output for iron ores in 2020 is in a range between 310 million tons and 330 million tons. It has taken into account the 15 million tons of output that may be affected by the epidemic.
Qiu Yuecheng, an analyst with Everbright Futures, said that the iron ore output of Vale in the first quarter was 59.6 million tons. If the production target of 320 million tons is to be achieved throughout the year, at least 260 million tons shall be completed in the second to fourth quarters, a year-on-year increase of approximately 30 million tons. As of the end of May, Vale's shipment volume decreased by 14.51 million tons year-on-year, and the shipment volume is still lower than the same period last year.
The epidemic in Brazil is still continuing. With the current shutdown of the mines with output accounting for more than 10 percent, it is difficult to convince the market that Vale can meet the annual target, according to Qiu.
However, some insiders believe that the news has little effect on the supply and demand side of the iron ore market.
From the perspective of subdivided iron ore resources, if the iron ore produced in this mining complex is missing, there will soon be alternative varieties appearing. Therefore, the impact is very limited, said Sun Ming, an manager of LangeSteel.com, a commodity information provider in China.
In terms of the demand, a number of data show that strong steel demand from the steel market in China will support the domestic iron ore prices in the short term.
Wind data shows that as of June 5, the iron ore inventory of 45 major ports in the country was about 107.54 million tons, a new low since November 2016. The blast furnace operating rate of 163 domestic steel mills has been 70.44 percent, a relatively high level in the past three years.
However, in the medium and long term, the glut in the domestic steel market will dampen the demand for iron ore.
Han Weidong, a senior expert of LangeSteel.com, said that overall, the domestic steel industry is in a state of oversupply. From January to April this year, domestic crude steel output increased by 1.3 percent, and the growth rate is expected to be 2 percent in May and June. The overall steel output is increasing substantially. In the second half of the year, about 100 million tons of production capacity will resume production, indicating that the domestic supply pressure will be greater. (Edited by Hu Pingchao with Xinhua Silk Road, hupingchao@xinhua.org)
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