Iron ore futures prices in China rose above 710 yuan (about $100) per ton on Wednesday. This price increase follows previous declines and is due to new concerns regarding the supply of iron ore. These concerns are particularly related to supply disruptions in the world's largest iron ore producer, Brazil, caused by El Niño and climatic changes.
Supply Disruptions in Brazil
Smaller iron ore producers in Brazil are facing a sharp increase in transportation costs to China, which has ultimately led to a reduction in their profit margins. As a result, some of these producers have decided to cut production.
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Demand Expectations from China
On the other hand, the price of iron ore is also supported by expectations of increased demand in China. Steel mills in China are expected to stock up on iron ore to meet their needs before the long Golden Week holiday in early October. However, the market continues to face serious challenges, particularly the declining profitability of steel mills in China due to high coking coal prices and supply constraints caused by safety inspections and mining suspensions in Shanxi province.
Additionally, weak demand from the construction and manufacturing sectors in China has led to a decrease in purchases of ferrous metals. These factors together affect the outlook for iron ore prices and may lead to further volatility in the near future.
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