Global iron ore short-term outlook May 2022

Iron ore markets alternated between demand concerns and expectations of a demand rebound in China as evident in two halves of May. Iron ore prices traded in a $20/t range during the month to average $134/t. Prices for rest of Q2 and Q3 will levitate around $140/t led by improving demand prospects for China. Chinese steel production is expected to turn a corner as the demand environment is seen improving. But we should caution that the growth could be slower than the market is hoping for. Meanwhile supply continued to stay tight especially from Brazil. Unseasonal rainfall and flooding in Pilbara is a key monitorable to watch out for as it can potentially create some operational issues at mines and ports. Further the move by Indian government to raise export tariffs on iron ore and pellets market will not augur well for an already clutched supply. There is no quick fix to seaborne supply constraints which will continue to play catch up to demand this year.