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September futures for iron ore, the most traded on the Dalian Commodity Exchange, for the period March 25 – April 1, 2024, dropped by 12.2% compared to the previous week – to 742 yuan/t ($102.66/t). On the Singapore Exchange, quotes for May futures as of April 1, 2024, fell by 10.3% compared to the price a week earlier – to $97/t. Thus, commodity prices continue to fall to new lows.
In March, iron ore prices on the Dalian Exchange fell by 15.2% and on the Singapore Exchange by 14.4%, from $121.1/t and $113.3/t, respectively. Iron ore prices gradually declined throughout the month, although the market grew slightly in the second half, followed by a sharp drop to $97-102/t. Thus, prices reached their lowest level since May 2023.
The downward trend in the iron ore market is the result of declining demand in China, the world’s largest consumer. The operations of steel mills are becoming unprofitable, forcing them to suspend production. In addition, last month the country’s authorities imposed environmental restrictions in some regions, which also affected steel production.
Despite the introduction of some economic incentives by China in March, the negative trend still prevailed in the raw materials market. Imports of raw materials from Brazil are also increasing. Last week, shipments increased by 1.8%. At the same time, steel capacity utilisation is also gradually increasing, but the growth rate of supply is much higher than demand.
In the short term, iron ore prices will stabilize as the country enters the construction season. Growth in steel consumption in China is likely to remain weak, but higher profits in the industry amid lower raw material prices are likely to boost production.
The Australian government expects iron ore prices to decline in the long term as supply increases and demand decreases. According to the country’s Department of Industry, Science and Resources, iron ore prices are expected to fall to around $68/t by 2029.
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