Iron ore prices
Iron ore prices surged to $78.00 per ton on August 18, 2017, its highest level since April 6, 2017. The jump in spot prices followed the increase in futures prices. In only two trading days, iron ore prices have gained 6.8%. Iron ore prices hit a low of $53.40 per ton in June, and they are up ~45% from that level.
Capacity cuts and iron ore prices
In early August, China’s Hebei province announced that capacity limits on steel mills in three cities would be imposed during the winter. The Chinese government has also called on steel producers in four provinces to cut their production in half during the peak winter months to fight pollution.
As other steel capacity cuts are also expected to take place in the winter months, steel mills are taking advantage of the high margins and producing more steel before the cuts take place. End users are also moving their purchases forward in anticipation of lower future supply. This could be the reason for surging prices of the primary steel-producing commodity—iron ore.
There are many factors that have contributed to the recent rebound in iron ore prices. We’ll discuss the factors responsible for their recent rebound. These factors include demand indicators for China’s steel supply and demand outlook. We’ll look at these factors as part of the bigger picture in the iron ore sector.
We’ll start by looking at analysts’ opinions regarding the outlook for iron ore prices.