The iron ore price bubble observed since the beginning of 2019 seems to be reversing as production outlooks indicate a steel supply surplus in 2019. Moreover, steel prices have been weakened by soft demand since the beginning of 2019, illustrated by the market price of Chinese HR coil decreasing by 13% y-o-y.
Iron ore prices quoted on the Dalian Commodity Exchange had jumped from CNY 470/MT in December 2018 to CNY 804/MT on the 28th May 2019, a 4-year high record. Speculations over future dams closing, following the disaster in Brumadinho, had led the steep price rise, showing a nearly 50% y-o-y increase.
However, prices have decreased by 10% w-o-w on the 5th June 2019 amid warnings from The China Iron and Steel Association (CISA) about a likely steel oversupply at a press conference in April 2019. Chinese coking coal prices also reacted, decreasing by 4% q-o-q. High prices of iron ore and coking coal seen since the beginning of the year, combined with low steel prices are likely to decrease demand for iron ore and coking coal as mill margins contracted.
