China Anticipates Iron Ore Price Dip as CNY Restocking Concludes

As the Chinese New Year (CNY) holiday approaches its conclusion, indications from market sources point towards an impending downturn in imported iron ore prices in China this week. The market sentiment had been notably bullish over the past month, fuelled by expectations of increased demand for raw materials among Chinese mills leading up to the CNY holiday.

However, the optimism that characterized China's iron ore market has gradually diminished in recent times, eliciting disappointment from market observers who noted subdued ore restocking activities among most steel mills. Contrary to initial projections, domestic steelmakers have largely finalized their restocking plans for iron ore, indicating a waning interest in large-scale ore replenishment in the run-up to the holiday.

Several factors contribute to this notable shift in market dynamics. Firstly, the relatively elevated prices of imported iron ore cargoes have acted as a deterrent, dissuading steel mills from undertaking substantial replenishment efforts. Additionally, the persistently slim profit margins in the steel selling sector have further discouraged domestic mills from engaging in extensive restocking activities.

The decline in steel mills' demand for iron ore has been particularly pronounced in the past week, coinciding with the conclusion of most mills' pre-holiday ore purchases. Chinese major ports underscore this trend, revealing that only 3.3 million tonnes of iron ore cargoes were traded during the period spanning January 29 to February 2. This marks a significant 29% plunge from the total volume recorded in the preceding week.

Turning attention to the supply side of the equation, projections indicate that wharf-side stocks of iron ore may continue to accumulate in the ongoing week. This expectation stems from the anticipation that the increase in the discharge volume of ore at ports will be outpaced by the rise in its unloaded volume. As of February 1, inventories of imported iron ore at China's 45 major ports registered a seventh consecutive weekly increase, climbing by an additional 1.4% compared to the previous week. The total inventory reached 129.5 million tonnes – the highest level recorded since April 2023.

The amalgamation of factors, including decreased ore restocking, dwindling demand from steel mills, and the sustained build-up of iron ore inventories at major ports, collectively contributes to the foreseen downturn in imported iron ore prices in China. In response to the evolving market dynamics, stakeholders will closely monitor these trends to make well-informed decisions within a landscape characterized by shifting demand patterns and economic conditions.