from article #7 below Part 7 - Why higher manufacturing increases iron ore prices, a positive -
underline emphasis added- prices are normally supported in winter due to southern hemisphere supply disruptions, as previous articles noted
"at the start of the year, prices for iron ore and coal were rising because of increased industrial activity in China. The wet season (typically between December and March) in Southern Hemisphere countries such as Brazil and Australia also contributed to the higher prices . So while we saw high prices for iron ore, they didn’t exactly help Capesize rates. (Capesize vessels primarily haul iron ore and coal.)
But when export resumed in April, it somewhat helped Capesize rates. On the other hand, iron ore prices were negatively affected by China’s new government’s tolerance for lower economic growth, on top of actions taken to cool the property market from overheating again around February.
Falling iron ore prices driven by increased supply
Since June, prices for imported iron ore have risen, following actions by the government to stabilize growth. As prices rose higher, however, they had a negative impact on August’s import data, as the difference between domestic and imported iron ore prices diminished. That meant a relatively weak period for Capesize rates.
But when prices came off their high of $140 in August to $131.5 per mt (metric tonne) on October 1 due to increased supply from Australia and Brazil, Capesize rates shot up, surprising many traders and analysts.
Higher iron ore prices driven by demand: Positive outlook
Prices were pretty much flat at the beginning of October, as steel plants closed and traders went on vacation during the National Holiday. So Capesize rates weakened as well. But as traders and mills resume production, prices have recently risen from $131.5 to $135 as of October 16. What does this mean? Lower supply or higher demand.
With Australia and Brazil increasing output, and no weather disruption seen, higher iron ore prices likely reflect an increase in China’s economic activity. At this moment, it looks like the risk of a significant Chinese slowdown is unlikely.
Continue to Part 8: Why low iron ore inventory at Chinese ports should support trade
