After hitting six-month highs earlier this week, iron ore futures are on the way down after comments from Guo Bin, the president of the world’s top steel maker, China Minerals Resources Group.
Guo Bin said the elevated cost of iron ore — a material crucial to steel making — was squeezing steel makers’ margins. He called for improvements in raw material pricing systems in light of the financial pressures faced by steel producers.
On Wednesday, iron ore futures in Singapore fell to US$122.55 per tonne. This followed iron ore reaching six-month highs on Monday at more than US$126 per tonne.
This shift is part of a broader commodities downturn seen in US markets, with industry giants BHP (ASX:BHP) and Rio Tinto (ASX:RIO) experiencing over 2% share price reductions.
Iron ore imports hold up
While exports from China declined more sharply than anticipated, iron ore imports have remained robust, holding near 100 million tonnes and defying some analyst expectations.
This stability in iron ore imports, despite a dip in steel demand, has been attributed to factors such as high steel production and limited policy reductions in China.
Analyst forecasts vary
Goldman Sachs (NYSE:GS) analyst Nicholas Snowdon revised upward his iron ore price forecast, countering earlier expectations of a surplus, and now envisaging a market deficit.
The move follows that of Citi analysts earlier this month, who acknowledged the surprising fiscal measures from China, including a 1 trillion yuan bond issuance, aiming to bolster the economy.
In contrast, analysts largely expect prices to remain close to the US$100 per tonne level after falling from highs of in excess of US$134 per tonne in January.
ANZ's senior commodity analyst Daniel Hynes maintains a conservative US$100 per tonne forecast for iron ore, suggesting the current price strength could be short-lived without sustained demand.