On the Singapore Stock Exchange, quotations of basic August futures as of June 27, 2024, fell by 6% compared to the price on July 1 – to $101.85/t. At the same time, in June, iron ore prices on the Dalian Exchange fell by 7.1% to 819 yuan/ton ($112.7/ton), and Singapore – by 10.1%, to $105.65/ton. The trend towards falling prices has been observed since May.
During July, commodity prices fluctuated. Since the beginning of the month, there has been an increase, and price levels reached $118.9/t in Dalian, and $113.7/t in Singapore. Quotations of products reached a monthly maximum due to stable short-term demand, supported by positive fundamentals in the Chinese steel indistry, weakening of the US dollar, and market hopes for the introduction of additional stimulation of the Chinese real estate market.
«The relatively high level of iron production, despite signs that it has reached the maximum possible limit, has supported the demand for iron ore in the short term. In addition, a seasonal increase in air defense supplies is expected to be completed soon, «Jinrui Futures analysts comment.
At the same time, from July 6, prices began to weaken gradually, reaching at the end of the month the lowest since April – $99.7/t on the Singapore Stock Exchange, and $105.5/t on the Dalian. This trend was caused by a drop in the production of cast iron and the productivity of blast furnaces, as well as an increase in port stocks. The market slowed in anticipation of the Third Plenum of China, which was held on July 15-18, where the government was to proclaim additional incentives to support demand for steel. Additional pressure on the market was caused by expectations of a drop in steel exports and its production in the II half of the year due to restrictions.
Stocks in major ports in the first decade of July reached 150 million tons, which is 25% more compared to the beginning of the year and 18% compared to the same period last year. Already in the middle of the month, this figure was 151.3 million tons.
Prices continued to decline after the meeting of Chinese officials, as market participants did not feel signals of any serious incentives against the background of weak economic results. In addition, the country’s fundamentals for the second quarter were lower than expected, which also did not contribute to positive changes in the steel and raw materials market.
«Without further stimulus measures, there is almost no hope for the recovery of the real estate and construction sector in the short term. As long as unsold housing volumes remain at high levels, new investment and construction activity will remain low, «ANZ analysts said.
This week, the market is waiting for a meeting of the Politburo, where new economic incentives may be announced.
The British international commercial bank HSBC Holdings expects that iron ore prices in 2024 will be at $100/t. The world market remains tense despite the real estate crisis in China, which worsens the prospects for steel demand in the country, the bank said.
Capital Economics predicts that ore quotes will vary at the level of $99-100/t. In the second quarter and fourth quarter, prices will be at $100/ton, and in the third – $99/ton. At the end of next year, prices for air defense will fall to $85/t. Among the key reasons for the negative outlook is the expectation of weak global demand for steel.
Courtesy: https://gmk.center/
