Iron ore prices up despite falling Chinese steel output

The iron ore price has lifted back above the $US60 a tonne threshold, despite falling Chinese steel output.

Iron ore rose 1 per cent to $US60.20 a tonne in the most recent session.

The iron ore price has lifted back above the $US60 a tonne threshold, despite data showing a fall in Chinese steel output and predictions that the decline could continue.

Iron ore rose 1 per cent to $US60.20 a tonne in the most recent session, according to The Steel Index, compared with $US59.60 the previous day.

Chinese government data showed average daily crude steel output in China slipped in July from a record peak in June, Reuters reported, with analysts expecting output to continue to fall over the coming months.

If Chinese steel mills’ demand for the steelmaking ingredient iron ore continues to soften, this trend could weigh on seaborne iron ore prices in the near term. As the iron-ore price has slumped over the past two years, cheap and high-quality imports have become more attractive to Chinese mills than the lower-quality iron ore produced domestically.

Meanwhile, analysts at Citi attributed the unexpectedly strong Chinese steel demand this year to government stimulus, saying this policy easing could mean China may escape a sharp slowdown.

“For iron ore specifically, scaling back of higher-cost production in China and elsewhere in the world has been offsetting continued expansion of lower-cost production from Australia,” analysts at Citi wrote in a research note.

“Steadying of demand from steel production has also helped.

“Chinese steel demand has been better than feared because policy stimulus has moderated the slowing in fixed asset investment, with government lifting infrastructure investment again.”