Iron ore prices are expected to face significant downward pressure, despite recent slight increases in port inventories. As of now, the total iron ore inventory at major ports across the country remains below 70 million tons, a trend that has persisted for over two and a half months. According to data from My Steel Network, as of April 7, the total imported iron ore inventory stood at 67.96 million tons, showing a marginal rise of 40,000 tons from the previous week.
Meanwhile, steel product inventories have continued to decline. As of April 5, 2013, the social inventory of five major steel products in key cities nationwide reached 21.6259 million tons, marking a 1.42% drop from the previous week and the third consecutive weekly decrease. On the other hand, the inventory of 80 key steel companies rose sharply in mid-March, reaching 14.51 million tons, compared to 12.85 million tons at the end of March—an increase of 1.686 million tons or 12.99%, hitting a record high.
Wang Xi, a researcher at My Steel Network, noted that the current low iron ore inventory levels reflect a strategic shift toward maintaining minimal stock. “Previously, Xinyu Steel maintained a three-month supply, but now it's only about one month. Similarly, Anshan Iron and Steel used to keep a two-month inventory, but now it’s down to just one level,†she explained. This strategy is driven by financial constraints within the steel industry.
Market participants are also cautious about pushing prices lower, as there is limited supply available in the spot market. Traders are reluctant to reduce prices, which suggests that the probability of a sharp decline in iron ore prices in the near future is low. Instead, prices are expected to remain relatively stable around $135 per ton.
Steel mills are currently facing losses, with several major companies reporting significant declines in profits. For example, Anshan Iron and Steel reported a loss of up to 4.157 billion yuan, highlighting the sector's struggles. However, some industry sources argue that the situation may not be as dire as it appears on the surface. After the Spring Festival, many steel mills have been preparing new furnaces, with several large blast furnaces set to go into operation soon.
Despite these developments, analysts believe that production will not be significantly reduced. Maintaining output is crucial for sustaining demand for iron ore. With current inventory levels remaining low and supply constrained, it is unlikely that iron ore prices will fall sharply. Instead, the market is expected to experience limited fluctuations.
Gao Bo, a senior analyst at the Iron and Steel Research Institute, emphasized that while the market hopes for a price drop, the current low inventory levels provide strong support. “Even if it doesn’t make money, it’s hard for iron ore prices to continue falling. Practitioners know the risks, but they also rely on steel demand for stability,†he said.
He also pointed out that the capital chain in the steel industry is under pressure, with many mills burdened by heavy debt. Reducing production could lead to even greater losses, making it difficult for companies to cut back. The fear is not about falling prices, but rather about a sudden market rebound that could lead to further losses.