en.Wedoany.com Reported - Mysteel's latest monthly report predicts that China's imported iron ore prices will continue to fall in July, mainly due to the seasonal summer slowdown in domestic steel demand, coupled with strong overseas shipments continuously arriving at Chinese ports, leading to increased ore supply.
The report notes that downward pressure may be further exacerbated by falling oil prices dragging down ocean freight rates, weakening cost support. In June, the average price of Mysteel SEADEX 62% Australian fines was $102/dry metric ton (CFR Qingdao), down $8.2/dry metric ton from the May average of $110.2/dry metric ton, marking the lowest monthly average since September last year.
The report analyzes that over the past month, iron ore prices have faced multiple pressures. At the macro level, rising expectations of a Federal Reserve interest rate hike, along with declines in China's retail sales, fixed asset investment, and real estate data, have exerted overall pressure on commodity markets. At the industry level, domestic steel prices in China have weakened as demand enters the summer off-season, with steel mills grappling with high production costs amid rising coking coal and coke expenses. More steel mills have fallen into losses, curbing their willingness to purchase ore.
Additionally, signs of easing tensions in the Middle East have led to a drop in oil prices, causing a sharp decline in iron ore ocean freight rates and further depressing ore prices. Mysteel tracking data shows that on the key route from Port Hedland in Western Australia to Qingdao Port in eastern China, daily freight rates for Capesize vessels fell to $10.3/ton on June 30, down $5.93/ton from the previous month, a decline of 36.5%.
Looking ahead to July, the report believes that China's iron ore market will continue to face a situation of expanding supply and weak demand, with further room for price declines. On the supply side, although shipments from Australian mines typically decrease seasonally in July, Brazilian shipments are expected to remain strong. More importantly, robust overseas shipments loaded in June will arrive at Chinese ports over the next month, steadily increasing available inventories. As of June 25, imported iron ore inventories at China's 47 major ports tracked by Mysteel rose 2.5% month-on-month to 175.4 million tons. The report forecasts that by the end of July, inventories are expected to increase to approximately 180 million tons.
On the demand side, domestic steel mills in China are expected to reduce pig iron production this month. Narrowing steel sales profit margins and expectations of further declines in summer steel consumption have dampened mills' production enthusiasm. As of June 25, among the 247 blast furnace steel mills monitored by Mysteel, about 51% (126 mills) reported profitability in steel sales, down 11 percentage points from a month earlier.
The report also warns that the possibility of a recent Federal Reserve interest rate hike will continue to loom over commodity markets, while ocean freight rates may decline further as the peak season for Australian ore shipments ends and oil prices continue to fall. In the worst-case scenario, iron ore prices in July could fall to their lowest levels in years. Mysteel assessments show that as of June 30, the lowest level of its assessed Mysteel SEADEX 62% Australian fines price occurred on September 23 last year, at $89.45/ton.
