The iron ore market in China has recently shown signs of stability after a period of continuous price decline lasting six days. The price of actively traded contracts on the Dalian Commodity Exchange (DCE) decreased slightly by 1.0 yuan to 707.5 yuan per ton. Meanwhile, spot prices have increased for the first time during this period. The price of Carajas iron ore rose by 4 yuan to 838 yuan, and the price of PB Lump iron ore increased by 3 yuan to 870 yuan per ton.
Increase in Transportation Costs and Its Impact on Prices
The cost of transporting iron ore from Brazil to China has also risen, reaching 42.02 dollars per ton, which is a new record for this period. This increase in transportation costs directly supports the prices of high-quality iron ore. However, demand for iron ore appears to be weakening. According to reports on production costs, some factories have entered maintenance periods due to a shortage of coke.
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Decline in Pig Iron Production and Its Impact on the Market
Pig iron production in China reached 67.65 million tons in August, showing a 3.5% decrease compared to last year. Additionally, production from January to August has also decreased by 3.1%. Maintenance pressures in factories are easing, which has directly impacted prices. The costs of imported iron ore have also decreased, and profit margins have fallen to negative 10.61 yuan per ton, leaving sellers with little room to reduce prices.
Analysts believe that prices will move towards stability at lower levels, and the premium for high-quality iron ore is increasing. Currently, the price index for iron ore with 65% purity remains stable and has only decreased by 1 yuan. While the price of iron ore with 58% purity has dropped by 1 yuan and the price of iron ore with 61% purity has decreased by 5 yuan, this has increased the price gap from 183 to 184 yuan per ton.
Two key points to consider are the increase in pig iron production if maintenance losses decrease and the time it takes to reach port inventories due to the recent increase in transportation (+8.59%). This issue continues to maintain supply pressure in the market.
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