RESEARCH: Key takeaways from the latest Steel Raw Materials Market Tracker

• This year has come with several unexpected events which increased the bullish case for iron ore prices, while the Chinese government’s spending on infrastructure is likely to boost iron ore demand and add upside support to prices. But supply disruptions and a demand surge which caused price spikes are now easing. We do not expect Chinese iron ore demand to maintain the high growth rates we have seen in recent months, but we still expect China to produce more pig iron than last year and provide upside price support. On the supply side, some downward risks to prices are mounting with high export volumes from Australia and a potential for rising exports from Brazil.
• Analysts have consistently underestimated the price surge so far this year but remain bearish on the price outlook for the rest of the year. All forecasts in Fastmarkets’ APEX (analyst price expectations) competition were bearish compared with the actual price developments in the first half of the year. Despite upward revisions, almost all analysts still remain bearish and anticipate a downward correction in prices.
• In the coking coal market, a supply recovery also appears under way. After a sharp quarter-on-quarter decline in both production and sales volumes of metallurgical coal across most of the major suppliers in the first quarter of the year, recently released operational results for the second quarter imply the recovery has begun. Despite the build-up of supply volumes, we expect prices to continue to recover modestly. That said, we believe expected further recovery in coking coal prices will be demand-driven. We anticipate support for seaborne coking coal prices in general will come from a rebound of demand from ex-China markets as well as the recent widening of coke margins and relatively high domestic coal prices in China compared with the seaborne material.

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