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[Ferro-Alloys.com]The China Iron & Steel Association expects China's iron ore prices for both domestically produced and imported cargoes to likely soften and stabilize in May, it said in its April report released Monday.
"Oversupply in the iron ore market will persist, and China's exchanges have been cooling down the speculative trading on steel and iron ore futures, and iron ore price [in the physical market], thus, will probably stabilize," the report stated.
On the other hand, China's demand for iron ore is unlikely to improve substantially as CISA's member steel mills will need to continue curtailing steel output, cutting excess steel capacity and reducing steel production costs in order to reduce losses.
Despite making some profit in March, CISA steel mills lost Yuan 8.75 billion ($1.35 billion) in the first quarter of 2016, suggesting that the steel industry was "still struggling."
Iron ore inventory at both Chinese mills' stockyards and at ports was seen increasing with the former up 6.1% or 2.2 million mt month on month to 38.3 million mt at end-April, and the latter up 3.8 million mt or 3.9% over the same period at 100.1 million mt, CISA said.
China's iron ore import price was seen declining. Platts assessed the 62%-Fe Iron Ore Index at $58.35/dry mt CFR North China on Friday, down from a 15-month high of $70.5/dry mt assessed on April 21, following lower Chinese domestic steel prices.
The physical spot price of Tangshan square billet, a closely watched barometer of steel performance in the steelmaking hub of China, fell to Yuan 2,290/mt ex-stock on Friday, down from Yuan 2,640/mt on April 21, and was down further to Yuan 2,120/mt as on Monday morning.
The decline in prices as forecast by the CISA was within market expectations as the surge in late April lacked support from fundamentals.
"The recent rise in the price of steel first and then iron ore, was mostly sentiment-driven and caused by hot money in the futures market than any substantial improvement in demand or supply, which is hard to sustain, and we will be back to reality soon," a sales official from a privately owned steel mill in North China's Hebei province said.
China's latest import and export data for April showed that the country's steel exports declined 9% month on month to 9.08 million mt, and iron ore imports dropped 2.2% month on month to 83.9 million mt.
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