Iron ore is a crucial commodity in the global economy, essential for various industries. Its price trends in the 21st century have been heavily influenced by China's industrial expansion. As both the largest producer and consumer of steel worldwide, China plays a central role in shaping global iron ore demand.
In the first quarter of 2024, iron ore prices dropped significantly, declining by nearly a third due to concerns over weakening Chinese demand. Prices dipped below $100 per ton before showing some recovery in April. Chinese authorities are actively working to stimulate the national real estate market, a key driver of steel demand. In response to these challenges, the steel industry association has urged its members to reduce production.
Dynamics of Iron Ore Imports to China
The fluctuating trends in China's commodity imports during the first half of 2024 have been primarily driven by price fluctuations rather than economic indicators. This is particularly evident in the case of iron ore, which was expected to face challenges due to the sluggish real estate sector. However, from January to June this year, imports of this raw material increased by 6.8% compared to the same period in 2023, totaling 611.2 million tons.
Despite the rise in imports, this did not translate into increased steel production; instead, it indicated replenishment of stocks by steel manufacturers. According to SteelHome consultancy, port ore inventories in China have surged by 35.7 million tons since the end of December 2023, reaching 150.2 million tons by July 12, marking a two-year high.
During the first quarter of 2024, iron ore prices on the Singapore Exchange exhibited a downward trend, stabilizing at lower levels in the second quarter. Prices peaked at $143 per ton in early January but dropped to $98.36 per ton in early April. Since then, prices have remained relatively stable, reaching $107.48 per ton on July 17.
Reducing Dependency on Imported Iron Ore
China aims to decrease its reliance on imported iron ore by boosting domestic production. In 2024, Chinese mining firms plan to increase iron ore concentrate production by 5-10 million tons compared to 2023, according to the China Iron and Steel Association (CISA). The association anticipates that advancements in new iron ore projects within China will enable a production capacity of 370 million tons of iron ore concentrate annually by 2025, thereby reducing the dependence of local steel companies on imports. In 2023, China imported 1.179 billion tons of ore, marking a 6.6% year-on-year increase.
From January to March 2024, China produced 72.07 million tons of iron ore concentrate (up 4% year-on-year) and 284.09 million tons of iron ore (up 15.3% year-on-year). During the same period, imports of iron ore totaled 411.82 million tons, reflecting a 7.2% year-on-year increase.
CISA forecasts that iron ore prices will likely remain low over the long term due to sufficient global supply from new projects worldwide, including Rio Tinto's Simandou project in Guinea.
Forecast for 2024
US investment bank Goldman Sachs has not changed its iron ore price forecast for the second half of 2024. The bank’s analysts continue to expect the price of benchmark ore with a 62% iron content to be around $100/t by the end of this year.
At the same time, analysts expect a shortage of this raw material from 2027, which will be caused by insufficient investment in new premium coal supplies in Australia and Canada.
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