Iron ore prices ticked up on Monday after two months of declines, helped by a slower than expected fall in demand from China, the top consumer. The most traded contract on the Dalian Commodity Exchange rose 0.59 percent to 679 yuan a tonne, after losing 3.4 percent in September and 4.3 percent in October, while the benchmark December contract on the Singapore Exchange gained 0.61 percent to 91.30 dollars a tonne, after slipping 6.1 percent and 2.6 percent in the same two months.
The demand fear had a specific shape. Some Chinese steelmakers have begun equipment maintenance amid weak profitability, and several in northern regions temporarily trimmed output to improve local air quality, which raised expectations of a sharp fall in hot metal output, the standard gauge of iron ore demand. The survey data did not cooperate: average daily hot metal output among surveyed steelmakers fell only 0.2 percent from the previous week to around 2.32 million tonnes as of October 29, according to consultancy Mysteel.
Supply offered some support of its own. Shanghai Metals Market data showed port arrivals at China’s main ports fell 15.7 percent on the week for the week ending October 30, to about 23.27 million tonnes, firming spot cargoes at ports even as futures faded later in Monday’s session. Vale’s latest quarterly figures, cited in the same review, showed third quarter iron ore production of 88.35 million tonnes, down 6.4 percent year on year, with full year guidance of 335 million to 345 million tonnes unchanged.
Analysts at Guoxin Futures summed up the balance in a note: iron ore is skewed to downside risks on weak fundamentals, but sentiment has recovered somewhat with prices falling close to the support level. Expectations of a fourth quarter supply glut remain the cap on any rebound, and the rest of the steel complex was weaker on Monday, with coking coal down 0.95 percent and coke down 1.6 percent on expectations of a faster supply recovery.
For the big Pilbara and Brazilian producers, 90 dollars is the level where the maths in Vale’s own warning starts to bind: management said last week that roughly a tenth of seaborne supply is losing money at current prices. A hot metal print that refuses to fall is, for now, the bull case, and it is a data point that updates weekly.