As operations at international miners are expected to pick up in June, pressure from growing supply is set to limit the upward room for iron ore prices.
In addition, a rising ratio of high-grade iron ore was seen among the overall port inventories of late.
Iron ore shipments departing Australian ports are likely to increase 820,000 mt to 16.17 million mt during May 25-31; volumes leaving Brazilian ports are likely to grow 590,000 mt to 8.45 million mt. These were in comparison to the level seen during May 18-24.
For the same period, some 63 vessels with 9.24 million mt of iron ore are expected to arrive at major Chinese ports, down 670,000 mt from 9.91 million mt during May 18-24 as congestions at some ports in east and north China will affect the arrivals.
However, we see limited downward room for iron ore prices as well. As of Monday May 28, profits for rebar stood at about 900 yuan/mt and profits for hot-rolled coil stood at about 1,100 yuan/mt based on an iron ore price of $63.75/mt cfr China.
The most-traded iron ore contract on the Dalian Commodity Exchange performed weakly on Monday. In the spot market, high-grade resources were offered slightly lower in the afternoon while low-grade resources remained little changed from the levels seen last Friday. The overall trading was thin as steel mills were keen to take a watch-and-wait approach at the start of the week.
The index for 58% Fe fines remained unchanged at 319 yuan/wmt while the index for 65% Fe fines dipped 1 yuan/wmt to 559 yuan/wmt.