The Zhitong Finance App learned that although fundamentals are still under pressure, iron ore prices are expected to record the biggest weekly increase since the beginning of May this week due to the upcoming strike action at the Port Hedland terminal owned by BHP Billiton (BHP.US), which raised market concerns about supply.
As of Friday, the price of this steelmaking raw material had increased by 1.6%, breaking the $99 per ton mark for futures contracts on the Singapore Exchange.
This trend is in stark contrast to June — iron ore recorded a decline in three out of four weeks due to weaker seasonal demand and narrower profits in steel mills. In the low season for traditional steel consumption, the price of this commodity continues to be under pressure, mainly due to an increase in shipping supply and the fact that Chinese port inventories are still high.
The direct catalyst for price increases stemmed from the union representing BHP Billiton Western Australia's Port Hedland iron ore terminal workers announcing that it will stop work for an eight-hour period on July 16. This move marks a further escalation of tension between labor and management, and may pose a potential threat to some supply.
Meanwhile, the dispute between China and Australian mining company Fortescue Ltd. (FMG) remains unresolved, and restrictions on the company's “super specialty powder” products are still being enforced. State-owned procurement companies have notified a number of steel mills and traders to suspend purchases of this mineral and add dollar-denominated pallets.
From a fundamental point of view, the profit situation of domestic steel mills continues to deteriorate. According to Mysteel survey data, only about 40% of steel mills are currently profitable, down nearly 3 percentage points from last week, and a sharp drop of more than 19 percentage points from the same period last year. At the same time, the operating rate of blast furnaces remains strong.
As of press release, Singapore iron ore futures rose slightly by 0.5% to $99.20 per ton; the iron ore contract on the Dalian Commodity Exchange strengthened at the same time, while the Shanghai rebar contract declined.