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September futures on iron ore, the largest traded commodity on the Dalian Commodity Exchange, have reached 888 yuan/t ($122.75/t), up 1.7% in the beginning of May. The price of June benchmark futures on the Singapore Exchange as of May 14, 2024, was $117.25/t, a 0.6% increase from the previous day's price.
The Dalian exchange saw a strong spike in iron ore prices in April. They were at $120/t at the conclusion of the month, having started at $110/t. Simultaneously, the price on the Singapore Exchange started at $101/t and ended at $118/t at the end of April. The April rise in iron ore prices reflected market hopes that the Chinese government would take measures to support the steel industry and expectations of a wave of post-holiday replenishment of iron ore stocks by steel mills.
At the same time, the market was cautious, as manufacturers’ finished goods inventories were still high. Overall macroeconomic expectations also improved slightly after China announced a policy to control steel production. As a result, ore prices gradually recovered during the month amid improved market sentiment and a pickup in construction activity. In addition, some of the country’s mining companies announced the start of maintenance, which increased interest in iron ore imports.
At the same time, in the middle of the month, market participants’ expectations of government incentives deteriorated slightly due to higher-than-expected GDP growth in China in the first quarter – by 5.3%. At the same time, the real estate sector, the main consumer of steel, was still facing problems. The steady improvement in ore demand overcame the impact of disappointing news about government stimulus, and prices continued to rise. At the same time, the sharp rise in prices in April raised concerns that the Chinese government might intervene to curb it.
Since the beginning of May, iron ore prices have shown a slight increase. Prices and demand are consolidating after a sharp rise in April, and neutral forecasts for domestic steel consumption do not contribute to a further rapid recovery in prices. In the short term, iron ore prices are likely to stabilise or decline slightly as pre-holiday restocking has stopped and the availability of raw materials in ports remains high and reaches a seasonal high. At the same time, the summer season is approaching, which is characterised by reduced activity in the steel market.
HSBC Holdings, a British international commercial bank, expects iron ore prices to reach $100 per tonne in 2024. The global market remains tense despite the real estate crisis in China, which worsens the outlook for steel demand in the country, the bank said. Capital Economics predicts that ore prices will range from $99-100/t. In the second quarter and fourth quarter, prices will be at $100/t, and in the third quarter – $99/t. By the end of next year, prices for iron ore will fall to $85/t. The key reasons for the negative forecast include expectations of weak global steel demand.
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