Recently, the negative macro front has weighed on ferrous metal futures prices. Under fundamental support, iron ore prices rose in early trading today, but after the National Bureau of Statistics released August data on the real estate sector at 10:00 a.m., ore prices iron plummeted in response and hovered all the way down, with a 2% drop at one point. Finally, prices lost 1.24% to close at 715 yuan/mt.
On the macro front, data released by the National Bureau of Statistics on Sept. 16 showed that among 70 large and medium-sized cities, the number of cities with lower sale prices for commercial residential properties increased. In addition, selling prices in different cities have experienced either growth slowdowns or widespread declines. Meanwhile, domestic investment in real estate development stood at 9,080.9 billion yuan in January-August, down 7.4 percent year on year. The selling area of commercial housing rose 23 percent from a year earlier, and China’s housing climate index fell further to 95.07.
As an essential raw material for housing construction, iron ore prices are particularly “sensitive” to changes in macroeconomic news and terminal demand.
Prior to the release of the data, the market generally expected terminal demand to improve, and with supportive macroeconomic policies to secure delivery of buildings and promote the resumption of production, the steel market is expected to thrive. Although the market was pessimistic about the housing market data, it was still shocked when the actual statistics for August were released.
In addition to the direct impact of macro news, fundamental support has also weakened.
On the supply side, iron ore supply has virtually stabilized. According to data from SMM released on September 12, total global iron ore shipments from September 5-11 came to 26.26 million tonnes, down 17.5% from the previous month. Among them, shipments from Australia to China amounted to 11.95 million tonnes, down 18.4% on the week, while shipments from Brazil to China fell 22.9% compared to the previous week at 3.17 million tonnes. During the same period, the total volume of iron ore arriving at Chinese ports was 15.74 million tonnes, down 40.5 percent week-on-week.
On the demand side, iron ore inventory at the 35 ports tracked by SMM stood at 133.24 million tonnes as of September 16, a slight increase of 360,000 tonnes from the previous week. and an increase of 2.46 million tons year-on-year. Average daily shipments from the 35 ports fell by 187,000 tons on a weekly basis to 2.712 million tons. The substantial decline was due to steel mills reducing inventory after the Mid-Autumn Festival holiday.
Overseas shipments were down from the previous week and daily pig iron production was also down due to blast furnace maintenance. SMM data shows that as of September 14, the average blast furnace operating rate stood at 94.35%, down 0.15 percentage points from the previous week.
It should also be noted that the Fed will officially raise interest rates next week, and then the focus will shift to whether the final interest rate hike is in line with market expectations. In addition, the government policy to ensure the success of the 20th National Congress of the Communist Party of China will also have some impact on the development of iron ore prices.
In general, the overall profits of steel mills are low at present and they are not enthusiastic about buying raw materials. However, as the National Day holiday approaches, steel mills are expected to restock before the holiday due to low inventories, which will help stabilize iron ore demand. Therefore, SMM believes that iron ore prices will rise in the short term.
Source: SMM Information & Technology Co, Ltd.