China iron ore port prices hit 16-month peak on high steel mill operation rates

China’s iron ore portside market prices reached a 16-month high Oct. 30 on solid demand supported by high operation rates at Chinese steel mills.

Platts, part of S&P Global Commodity Insights, assessed 62% Fe iron ore China port stock indexes, IOPEX, at Yuan 972/wmt FOT East China, the highest level since June 2022, reflecting a speedy Chinese economic recovery.

Despite negative steel production margins, Chinese steel mills ran high operation rates for blast furnaces, which supported iron ore demand. Total crude steel output from January to September was at 795 million mt, up 1.7% year on year, according to China Iron and Steel Association.

“Not all finished-steel production margins were low,” said an Eastern China steel mill source, adding that some steel products such as ship plates, galvanized sheets and cold-rolled plates had good margins.

“The current margin is not too low to prompt steel mills to reduce production,” said a China-based trader.

Firm steel demand in both domestic and export markets was seen. China’s finished-steel exports in the first nine months jumped 31.8%, or 16.11 million mt, on the year to 66.81 million mt, Chinese customs data showed.

Meanwhile, China domestic construction steel demand may also rise after the central government said it would issue Yuan 1 trillion ($139 billion) in additional government bonds in the fourth quarter to support the rebuilding of disaster-hit areas and raise the country’s disaster relief capabilities.

Steel production margins will likely improve amid a strong steel demand outlook, so steel mills may keep their utilization rates for blast furnaces high if there are no policy-related production cuts, supporting iron ore demand, according to market sources.

Separately, overall port stock was at a multiple-year low, despite market sources saying that the discharge of more cargoes at the port may ease supply tightness slightly and lead to rising stocks.

The market continued to see healthy import margins for iron ore. According to Platts calculations based on the IODEX and IOPEX daily assessments, import margins for iron ore medium-grade fines have remained positive since June.

More cargoes of medium-grade fines have been purchased in the seaborne market and will be discharged at Chinese ports. Most market sources were not worried about accumulating stocks portside as demand is stronger than supply.

As winter approaches in China, some market participants are discussing how winter environmental production cuts may affect iron ore demand in the coming months.
Source: Platts