Everbright Futures: Under supply disruptions, iron ore leads the rally in the ferrous metals sector

On Thursday night trading, the main contract for iron ore opened significantly higher, then continued to fluctuate at high levels. By Friday midday, the iron ore futures price was still up more than 2%, leading the non-ferrous metals. According to China Steel Web, BHP Group’s Newman fines have been added to the spot restriction list, and Chinese buyers may be unable to purchase this mainstream ore starting next week. Given the difficulty in finding equivalent-sized alternative resources domestically in the short term, spot liquidity in the iron ore market has further tightened, which may push prices higher in the short term.

Fundamentally, on the supply side, shipments from Australia and Brazil have declined, and shipments from other countries have also decreased. Recently, the geopolitical situation in the Middle East remains uncertain, which has somewhat increased the cost of sea freight for iron ore and supported futures prices. On the demand side, environmental restrictions continue to impact production, with 8 blast furnaces undergoing maintenance and 12 blast furnaces resuming operation. Maintenance is concentrated in Hebei Province, with pig iron production decreasing by 63.9k tons to 63.9k tons month-on-month, expected to recover next week. The import iron ore inventory at 47 ports is 179.4732 million tons, an increase of 524.9k tons from the previous period, with 112 ships in port, down 3 ships. Steel plant inventories decreased by 820k tons to 89.29 million tons month-on-month. Amid mixed bullish and bearish signals, it is expected that the short-term iron ore futures market may show oscillating upward trends, but caution is needed in case Newman fines’ import restrictions are lifted, which could lead to a supply rebound and a potential price correction. (Everbright Futures)