The price of iron ore held onto near four-month highs on Thursday despite fresh evidence of weakening demand in the 1.3 billion tonne seaborne iron ore market.
The benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin was steady at $63.80 a tonne according to data provided by The SteelIndex, the highest since mid-February.
A rally that began April has seen the price rise by more than 36% from record lows struck at the beginning of April but the steelmaking raw material still trades nearly 10% below 2015’s opening levels.
While most industry watchers have laid the blame for the slump on the supply side, a slowdown in China has also put prices under pressure.
Signs of weakness were evident on Monday after Chinese customs data showed
in May cargoes fell by 8.4% compared to a year earlier and 12% month on month at 70.9 million tonnes.
The country took in more than 80 million tonnes in April and on a year to date has now fallen below 2014’s record year for imports.
The country consumes 70% of the seaborne iron ore trade.
On the positive side, port stocks have declined for eight weeks in a row falling to its lowest level since November 2013 at 83.8 million tonnes.
That’s down from a peak above 110 million tonnes hit mid-year 2014.
While higher prices may last in the short term, rates need to drop again to force the closure of higher-cost mines to balance the market, they said.
“The outlook remains unchanged,” said Mr Lelong.” Chinese steel consumption is contracting and we expect seaborne iron ore demand to peak next year, turning the iron ore market into a zero sum game.”
Image of construction workers in Beijing by Loic.Hofstedt