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Report: The resurgence of iron ore prices amid low inventories in China

May iron ore futures, which is the most heavily traded on the Dalian Commodity Exchange, for the week of March 24-31, 2023, rose 4.8% from the previous week – to 907 Yuan/t ($132.13/tonne). This put iron ore quotations back on the rise after two weeks of decline.

On the Singapore Exchange, May futures contracts, as of March 31, 2023, increased by 4.3% compared to March 24 of the current year – up to 125.1 USD/tonne.

Iron ore prices turned to growth after two weeks of declines as market sentiment improved amid lower inventories at Chinese ports.

Concerns that China will cut steel production in 2023 continue to weigh on the market, along with weaker-than-expected demand for steel and prospects for an oversupply of crude, but the situation has improved after the release of data on iron ore remaining at ports.

Traders are also capping price gains because they still fear the intervention of Chinese regulators who believe prices have been moved higher through speculative tactics.

Concerns about the global recession and weak steel demand, as well as steel companies’ strategy to keep raw materials stocks low, are likely to drive iron ore prices down.

However, given that raw material inventories at the ports are at their lowest level since the beginning of February this year, any potential drop in prices will be very limited.

In the short term, China’s iron ore prices will depend on the country’s economic recovery and final steel demand.

It is expected after the release of the industry PMI, it may support iron ore prices if it shows an increase in economic activity.

For further growth in prices, the market must make sure that there is demand from the construction sector and the peak construction season along with low stocks of raw materials will push iron ore prices to higher levels.

According to forecasts, iron ore prices will decline by the end of 2023 to $90/t, and the main reason for the decline in prices will be the growth in stocks of raw materials due to the recovery of supplies from Brazil, India, and possibly from Russia and Ukraine. At the same time, iron ore consumption will be lower than supply.

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