Iron ore down again, ex-China steel prices resume declines despite provinces’ output cut targets

Prices of major raw materials like iron ore and steel spot prices in China as well as export quotations from China have decreased by increased margins on Monday, June 24. Though last week was quiet and prices were going down gradually, the mood today has worsened again as fundamentals like poor local demand due to rainfall and hot weather offset the impact of other factors such as the steel production cut targets for 2024 announced by Chinese provinces.

Iron ore with 62 percent Fe content has lost $2.55/mt today, coming to $102.25/mt CFR, while ex-Brazil iron ore with 65 percent Fe content stands at $117.9/mt CFR, down by $2.2/mt on the same day compared to the previous trading day. Demand has been stable at the reduced levels seen late last week. There were 18 deals for a total of 543,500 mt of iron ore at the Corex platform on June 24, versus 546,000 mt traded last Friday at the same platform. “The market can’t change the way it is going: demand is less than supply,” a market source commented. At the moment, buyers are focusing on July shipment iron ore, which will arrive in early August at the latest, when steel mills usually try to lower seasonal steel production. Also, spot iron ore prices have been impacted by sharply dropping futures prices, with iron ore at Dalian Commodity Exchange losing 3.711percent today, reflecting a lack of confidence in the market.

As for the steel market in China, it has also followed a downtrend, pushed down by weak demand in the local market, which has also triggered a further reduction in exports.

SteelOrbis’ reference prices for major steel products for local and export markets in China, June 2024

*- tradable price, include traders and the most competitive mills’ HRC prices

“I am thinking that the price has very few upward factors at the moment. The third quarter is seasonally weak in China, so supply in the international market will stay high,” an Asian trader said.

Though export prices were relatively stable in the second half of last week, they resumed their decline today, even though there have been more announcements by some provinces about steel production cuts targets for 2024. In particular, Fujian Province has set the target for steel production at 85 percent compared to 2023, resulting in cuts of 3.5 million mt, as reported in the official document. There have been no official announcements from other provinces yet, but there are rumors that Jiangsu Province, the second largest in China in terms of steel production, will cut production by 5 million mt, while the expected reduction of output in Shandong, number three among the top producers, will be 2-5 million mt. It is heard that the fourth steel production hub - Shanxi Province - will cut 2.95 million mt of steel production. However, no firm reports have been released for the production cut target for the largest province, Hebei. Some local media claimed the target should be set at 15-17 million mt, while some said they would be at least a 10 percent decline compared to the 2023 result, which is up to 20 million mt. In any case, a reduction is expected and in fact for the first five months the total amount of crude steel has already declined by 1.4 percent or 6 million mt.

“A lot will depend on who [BF-based large mills or EAFs, or smaller mills] will do these cuts and when. We are waiting for more news,” a large Chinese trader said.