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HIGHLIGHTS
62% of China market participants expect iron ore prices to stay above $120/mt CFR
Half of respondents see infrastructure as main driver, manufacturing set to play a bigger role
China's finished steel exports expected to rise next year
High iron ore market prices seen in recent months are expected to continue into the first quarter of 2021, supported by strong Chinese steel output, according to the latest S&P Global Platts Iron Ore & Steel Outlook.
Some 62% of participants said iron ore prices would remain above $120/mt CFR China in Q1, with a further 26% seeing them in the $110-$120/mt range.
Platts iron ore and steel outlook Q1 2021
More than a third of respondents believed their iron ore requirements would increase in Q1, while 42% thought they would stay the same as in the current October-December quarter. Just 23% saw their iron ore needs declining in Q1, the Outlook found.
The Platts 62% Fe iron ore fines benchmark has risen 30% since the start of November, hitting a seven-year high of $160.70/mt CFR North China on Dec. 11.
Some 52% of respondents saw infrastructure construction as the major driver of steel consumption in Q1, with only 16% nominating property construction. For the first time since the Outlooks began in late 2019, a sizeable number (32%) of respondents said manufacturing would play a bigger role for demand in 2021.
China's housing sector growth is expected to be flatter in 2021. Manufacturing has recovered strongly in recent months and global supply chains have been restored, helping China's exports to resume.
Given the recovery in other steel markets, China's finished steel exports are tipped to increase next year. Most participants saw exports at 60 million-80 million mt in 2021, while only 12% saw them higher than this level. This year, China looks on track to export around 54 million mt of steel, compared with 75 million mt in 2019.
It is worth noting that the first quarter of each year contains China's Lunar New Year holidays when markets close for at least a fortnight. Q1 is also the period when adverse weather conditions impact iron ore operations in Australia and Brazil, resulting in lower export volumes.
Platts spoke to 30 companies for the Outlook over Dec. 7-11, comprising Chinese mills, domestic and international traders and mining companies.
Source: S&P Global Platts
Dec. 23, 2020 Beijing China
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