Forecast and analysis of production of iron ore and steel

Sucden Financial has published a report that analyzes and forecasts the output of iron ore and ferrous metallurgy in the 3rd quarter of 2016.
According to the report, iron ore prices rose in the second quarter of this year. However, prices managed to stabilize around $ 50- $ 55 per tonne in June. Prices touched a low of $ 38.30 last December and a high of about $ 70 per tonne in April this year.

Iron ore prices are likely to settle in the range of $ 48 per tonne to $ 60 per tonne. In the absence of a sustained recovery in the Chinese economy. Most likely, prices will be near the lower end of the range. Iron ore prices could drop back to $ 48 and plunge further to $ 45 per ton in the long term.

Iron ore production in China has declined in recent years, as has other countries. However, major iron ore producers reported higher yields during this period. In addition, they have already announced plans to increase capacity in 2017 and 2018. Thus, the maritime transport market for iron ore is unlikely to witness a shortage. Consequently, the rise in prices will be short-lived. High iron ore prices are highly correlated with increased steel production. The drop in steel production will lead to oversupply, which in turn should keep iron ore prices down.

Steel production rose higher by 9.7% during March-May 2016 compared to the previous three months. This is significantly higher than the 4.4% growth reported in March-May 2015 compared to the previous three-month period. Sucden notes that steel production is trending upward in March each year due to restocking from the construction industry after a long winter season. However, the jump in production in March this year was phenomenal. In addition, production data released by the World Steel Association indicates that in July, world crude steel production stood at 133.742 million tonnes this year, registering a 1.4% surge over the previous year.

Hot rolled coil (HRC) prices in North America and Europe have climbed on the back of a sharp drop in imports from China due to stringent anti-dumping measures. High restocking rates also support higher HRC prices. However, cheap Asian and Russian steel prices are likely to drive steel imports to North America and the European region from countries such as Russia, Korea and Taiwan. This will lead to a consolidation of steel prices at a lower level.