Steel Products Prices North America

Iron Ore Prices Rise, But Bearish Risks in Sight

November 15, 2018

By CRU Senior Analyst Erik Hedborg

Iron ore prices have lifted since last week, primarily due to concerns over BHP suspending operations on its Pilbara network. [Editor’s note: BHP suspended rail operations in Western Australia after it was forced to deliberately derail a runaway ore train on Nov. 5.] This caused iron ore prices to surge to a seven-month high late last week, before shedding some of their gains this week on the back of better damage control measures implemented by BHP. The wreckage has now been cleared and railway services to Port Hedland have recommenced. There was a marked decline in Port Hedland shipments since the accident, but there is increasing likelihood that operations will come back to normal sooner than previously thought.

Stable BF capacity utilization rates in China also lent some support to iron ore prices. However, steel prices in China seem to have lost steam with substantial weekly falls seen across flat and long products. This is further trickling down into weaker margins for the Chinese steelmakers. Also, according to CRU sources, some steel mills in Hebei and Shandong are hesitant to procure iron ore at the moment due to their relatively high stock levels and their lack of confidence in Chinese demand during the winter season. In India, a steelmaker was heard to be making plans to procure a higher quantity of ore from the domestic market. We have assessed the weekly average 62% Fe, CFR China, price at $76.30 /t, up $1.30 /t w/w.