The price of iron ore held onto
near four-month highs on Thursday despite fresh evidence of weakening demand in
the 1.3 billion tonne seaborne iron ore market.
The benchmark 62% Fe import price
including freight and insurance at the Chinese port of Tianjin was steady at
$63.80 a tonne according to data provided by The SteelIndex, the highest since
mid-February.
A rally that began April has seen
the price rise by more than 36% from record lows struck at the beginning of
April but the steelmaking raw material still trades nearly 10% below 2015's
opening levels.
While most industry watchers have
laid the blame for the slump on the supply
side, a
slowdown in China has also put prices under pressure.
This rally is living on borrowed time
Signs of weakness were evident on
Monday after Chinese customs data showed
in May cargoes fell by 8.4% compared to a year earlier and 12% month on month
at 70.9 million tonnes.
The country took in more than 80
million tonnes in April and on a year to date has now fallen below
2014's record year for imports.
The country consumes 70% of the
seaborne iron ore trade.
On the positive side, port stocks
have declined for eight weeks in a row falling to its lowest level since
November 2013 at 83.8 million tonnes.
That's down from a peak above 110
million tonnes hit mid-year 2014.
Bloomberg and
the FT quote Goldman Sachs analysts
Christian Lelong and Amber Cai as saying "this rally is living on borrowed
time" and that prices should fall back below $50 per tonne:
While higher prices may last in
the short term, rates need to drop again to force the closure of higher-cost
mines to balance the market, they said.
“The outlook remains unchanged,”
said Mr Lelong.” Chinese steel consumption is contracting and we expect
seaborne iron ore demand to peak next year, turning the iron ore market into a
zero sum game.”
Source: Mining.com