China is shifting towards a green economy and in doing so, is encouraging more domestic steel consumption over steel exports. Subdued prices within the next six months could also be expected as a results of active government intervention, but ore may test $250/mt when Chinese buyers look to replenish depleted stockpile, as reported by OCBC Bank.
Chinese buyers to replenish ore inventories in 2022 as current stockpiles deplete
“The key changes that we still expect are the encouragement of a) more scrap steel imports; b) higher domestic consumption of steel vis-à-vis export market sales. In short, we expect China to import less ore while encouraging a better recycling rate of steel domestically, via reduced steel exports and better foreign scrap steel purchases.”
“Iron ore imports may remain low within the next 6-9 months as steel mills draw down on existing inventories and sell an increasing share of its production to local end-users. As ore inventories still dwindle, however, we expect China to return for ore to replenish stockpiles and feed its domestic appetite for steel.”
“We expect ore prices to stay supported within the near-term, and eventually test a high of $250 before the top of the year.”