Iron ore prices under noticeable pressure

by David Fleschen

Iron ore prices have been falling noticeably since the day before yesterday. On the SGX in Singapore the price has fallen by almost 7% since Tuesday. Yesterday the biggest daily loss since March was recorded here. On the DCE in Dalian the price drop is just as big. However, at 117 USD (SGX) and just under 790 CNY per tonne (DCE, converted 116 USD per tonne), prices are still quoted at very high levels. The decline is attributed to an expected imminent stock build-up in China. In recent weeks, ships that could not be unloaded had been stowed off some Chinese ports. However, this jam has now been cleared and more iron ore should flow into the country again.

At the end of last week, there were around 119 million tons of iron ore in the Chinese ports, the largest quantity in five months. Stocks have already been replenished since mid-June, but this has not yet affected prices. In addition to the stockpiling, higher iron ore exports from Brazil are apparently also contributing to the price decline. According to data from the Ministry of Economics, 2.17 million tons of iron ore per day have been exported in September so far. A year ago, the figure was only 1.52 million tons per day. The world's largest iron ore producer from Brazil had already announced higher production in July and thus higher exports in the second half of the year. These are now apparently being implemented. As a result, it should also be possible to largely make up the shortfall compared with the previous year - in the first eight months of the year Brazil exported just under 9% less iron ore than in the same period of the previous year. In our opinion, the seaward iron ore market should, among other things, be better supplied again, so that iron ore prices should continue to fall.

Source: Commerzbank Research, Photo: Fotolia

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