CRU: Iron ore rally showing signs of cooling down

Iron ore prices spiked as the Chinese market reopened after the country’s seven-day holiday, but the rally started to lose steam on Tuesday afternoon. The iron ore price closed at $106.5 per dry metric ton (dmt) today, which is $2.0/dmt lower than the closing price before the holiday.

Iron ore supply has remained ample after strong shipments in September. Australian supply declined somewhat in the first week of October, but this is expected for the first week of Q4 as producers are carrying out maintenance after sustaining robust shipments since mid-August. Indian exports have been subdued during China’s holiday period and will be restricted by post-monsoon restocking activity in the domestic market in October. Ukrainian producer Ferrexpo released its Q3 results, showing a 16% quarter-over-quarter (q/q) decline in total production under challenging environment of high costs including electricity, freight, and additional war risk insurance premiums. In Brazil, iron ore exports were very strong in September at 36.9 million metric tons (mt), up by 2.6 million mt month over month (m/m) and 1.3 million mt year over year (y/y). Low-grade exports remained high as many small producers in Minas Gerais make one final push before the wet season starts. We also see an increasing proportion of Brazilian ore being shipped to China. Our data shows that arrivals of Brazilian ore to the Chinese market will reach a new all-time high in the coming months.