Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China's Qingdao port, which moved in the range of $59-66/mt CFR last week, have declined by $4/mt since last Friday, starting the current week at $55-55.5/mt CFR China. As of May 2,inventory of iron ore at 33 major Chinese ports amounted to 92.88 million mt, down 260,000 mt or 0.28 percent compared to the inventory level recorded on April 25, as announced by China's Xinhua News Agency.
Iron ore prices in China, which started May on a downward trend after the Labor Day holiday, have declined by 15 percent during the past week under the influence of the $62.5/mt fall seen in Chinese billet export offer prices in the same period. Iron ore prices are expected to fall further in the coming days due to the ongoing oversupply in the global iron ore market combined with the end of the improvements recently recorded in iron ore consumption.
Vivek Dhar, associate director at Commonwealth Bank, stated that the increase in China's port stocks "reflects strong growth in low-cost iron ore supply from Australia and Brazil". He continued by saying, "The disconnection between China's iron ore port stocks and prices looks to be growing. It raises the risk of a potential correction in iron ore prices in the short term." Additionally, Rio Tinto's departing managing director Sam Walsh has warned that the quotations of iron ore - Australia's biggest export product - may fall as low-cost supply enters the market, while adding that he considers that it is too early to call a bottom for iron ore prices.
On the other hand, in budget talks held on May 3, the Australian federal government increased its forecast for iron ore prices to $55/mt for 2016 and 2017. Meanwhile, investment bank Goldman Sachs has stated that iron ore quotations will keep dropping throughout 2016, though not by as much as it initially forecast, adding that the ongoing oversupply is the main reason for this expectation. Goldmans Sachs also increased its forecast for iron ore prices for this quarter by 47 percent to $55/mt, which it says will be the peak iron ore price for the year. The investment bank forecasts that iron ore prices will fall to $45/mt in the third quarter and then to $40/mt in the fourth quater.
Meanwhile, Citigroup has increased its forecast for iron ore quotations to $45/mt for 2016, while Deutsche Bank has reported an "upward risk" for iron ore prices in the current quarter.
