Iron ore markets short-term outlook August 2021 Report

Commodity Market Report 31 August 2021

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Report summary

Iron ore spot price fell 15% over the month of August to US$159/tonne at the time of writing. While we have been expecting iron ore prices to trend lower, the speed of the price contraction was impressive. Our analysis of market fundamentals shows support for iron ore prices at US$130/tonne. While technical indicators show prices should trade within a US$150-US$165/tonne range in the short term. Chinese announcements regarding the approach to balance economic growth and pollution concerns remain critical to the iron ore price trajectory. While improved iron ore supply availability will keep a lid on iron ore prices, this time of year – known as “Golden September and Silver October” – should provide support from what has already been a sharp correction. Overall, we are comfortable with our Q4 2021 price forecast of US$155/tonne, with prices declining to average US$125/tonne next year. However, there is more downside risk to prices now than at any other time this year.

Where is the floor for iron ore prices?
Market fundamentals support a price of US$130/tonne
Technical price indicators also suggest support for prices at current levels
Price spreads likely to favour high-grade ore
Lump premiums plummeted but likely to find support because of sintering restrictions
Chinese steel production curbs will dictate demand in H2
Seaborne supply remains tight
and Chinese domestic supply begins to falter as prices fall
Strong Indian iron ore production backed by firm domestic demand
Mine lease auctions commence in India
Increased iron ore supply and Chinese steel production curbs contribute to higher Chinese p orts inventories
Freight – rising shipments from Brazil combined with increased congestion in China push freight higher

Tables and charts

This report includes 20 images and tables including:

Key forecast data
Cash cost curve (62% Fe) and demand
62% Fe fines price (CFR China)

Key quarterly forecast
62% Fe - Fibonacci Retracement Levels
62% Fe Forward Curves
Iron ore price spreads
Lump premium
Production cuts required to achieve no growth in 2021 crude steel production
Portside iron ore trading activity slowing down (kt per day)
National blast furnace capacity utilisation rate stepping down (%)
Chinese domestic mine utilisation rate dropped due to restrictions on mining activity
Domestic iron ore are losing cost-competitiveness
Indian iron ore production
Reserves of mines under auction (Mt)
Chinese iron ore port inventories
Chinese total steel inventories
Capesize freight rates to China
Share of freight rate in 62% Fe iron ore price
Quarterly indicators: iron ore trade, crude steel and hot metal production (Mt)