6 In the current month, steel prices showed a trend of first rising and then falling, with narrow fluctuations. Meanwhile, iron ore prices reversed their previous downward trend and began to rise. Affected by the decline in steel production, demand for iron ore remains weak, and port inventories of iron ore remain high. The market’s supply-demand imbalance has yet to improve. As we enter peak summer, steel consumption has become even weaker, and iron ore prices are expected to continue fluctuating slightly in the coming period.

I. China’s iron ore price index has turned from declining to rising.

According to monitoring by the China Iron and Steel Association, as of the end of June, the China Iron Ore Price Index (CIOPI) stood at 198.77 points, up 13.02 points from the previous month—a rise of 7.01%. Month-on-month, the index shifted from a decline to an increase. Specifically: the domestic iron ore price index was 188.90 points, down 1.01 point from the previous month, representing a decline of 0.53% and narrowing by 6.27 percentage points compared to the previous month; the imported iron ore price index was 200.63 points, turning from a decline to an increase, rising 15.66 points—a gain of 8.47%. (See the table below.)

Table of Changes in the China Iron Ore Price Index (CIOPI)

Looking at the monthly trend, the China Iron Ore Price Index (CIOPI) as a whole was lower than the previous month. The average value for June was 189.99 points, down 10.23 points from the previous month’s average, representing a decline of 5.11%—a narrowing of 2.13 percentage points compared to the previous month. Specifically: the average value of the domestic iron ore price index was 188.08 points, down 9.78 points month-on-month, with a decline rate of 4.94%, marking a shift from month-on-month growth to decline; the average value of the imported iron ore price index was 190.36 points, down 10.30 points month-on-month, with a decline rate of 5.13%, narrowing by 3.57 percentage points compared to the previous month.

II. Prices of domestically produced ore remain relatively stable, while prices of imported ore show upward fluctuations.

6 At the end of the month, the tax-inclusive price of domestically produced iron ore concentrate was 486.06 yuan per ton, down 2.61 yuan per ton from the previous month, representing a decline of 0.53%. The landed price of imported fine ore was 54.19 USD per ton, up 4.23 USD per ton from the previous month, with an increase of 8.47%, marking a reversal from a month-on-month decline to an increase. (See the chart below.)

Looking at the monthly trend, prices of domestically produced iron ore concentrate and imported fine ore remained stable, with overall levels lower than those of the previous month. The average tax-inclusive price of domestically produced iron ore concentrate for the entire month was 483.95 yuan per ton, down 25.17 yuan per ton from the previous month’s average, representing a decline of 4.94%. Specifically: From June 1 to June 6, the price slightly dropped from 487.61 yuan per ton to 482.19 yuan per ton; from June 6 to June 24, prices fluctuated slightly; and from June 24 to the end of the month, the price slightly rose from 482.05 yuan per ton to 486.06 yuan per ton.

The average landed price of imported fine ore for the entire month was US$51.42 per ton, down US$2.78 per ton from the previous month’s average, representing a decline of 5.13%. Specifically: From June 1 to June 6, the price rose slightly from US$49.18 per ton to US$51.03 per ton; from June 6 to June 24, prices fluctuated slightly; and from June 24 to the end of the month, the price climbed from US$51.54 per ton to US$54.19 per ton. (See the table below.)

Table of Price Changes for Domestic Iron Concentrate and Imported Iron Ore

III. Analysis of the Later Trend in Iron Ore Prices

As steel prices on the market decline, steel production will decrease somewhat. Meanwhile, port inventories of iron ore remain at high levels. Although, at the end of June, influenced by news such as Brexit and the restructuring of Baowu, futures markets spurred a rise in spot prices, overall demand has not shown any significant improvement, making it difficult for iron ore prices to rise substantially in the coming period.

1 Steel prices are fluctuating downward, and steel production continues to decline.

According to monitoring by the China Iron and Steel Association, at the end of June, the CSPI domestic steel composite price index stood at 67.83 points, down 2.14 points from the end of May—a decline of 3.06%, marking the second consecutive month of month-on-month decrease. According to the association’s bi-weekly report, in the first half of June, the cumulative daily crude steel output of member steel enterprises totaled 1.7227 million tons, a decrease of 2.01% compared to May. Since the onset of summer, with weak growth in steel demand and amid ongoing efforts to reduce overcapacity and destock, steel production has found it increasingly difficult to continue expanding, and demand for iron ore has likewise struggled to rise.

2 Port inventories remain high, and the oversupply situation for iron ore shows no sign of improvement.

According to monitoring by the Iron and Steel Association, as of the end of June, enterprises’ inventories of imported iron ore stood at 41.37 million tons, an increase of 3.7 million tons from the previous month, representing a rise of 0.90%. Meanwhile, nationwide port inventories of imported iron ore totaled 102.68 million tons, up 8.2 million tons from the previous month and up 23.97 million tons year-on-year. 1-5 In the current month, the nation’s pig iron production totaled 286 million tons, a year-on-year decrease of 82.2 million tons. Meanwhile, iron ore imports during the same period reached 412 million tons, up by 344.5 million tons year-on-year. The market situation of oversupply in the iron ore sector remains unchanged. (See the chart below.)

3 Steel enterprises have low profit margins, and it’s difficult to improve their efficiency.

According to statistics from the Iron and Steel Association, from January to May, member steel enterprises achieved cumulative profits of 8.736 billion yuan after offsetting losses against profits, marking a turnaround from loss to profit. However, the sales profit margin stood at only 0.83%, indicating that the task of reducing costs and improving efficiency remains daunting. With both the steel market and the iron ore market experiencing oversupply, it is unlikely that iron ore prices will see a significant increase.

  Attachment: Trend Chart of the China Iron Ore Price Index (CIOPI)