Iron ore futures slipped on Monday as rising port inventories of the steelmaking ingredient in China helped soothe worries over global supply tightness that have kept spot prices supported at above $100 a tonne for more than a month now.
Iron ore on the Dalian Commodity Exchange fell as much as 0.5% to 740 yuan ($104.90) a tonne, while the Singapore Exchange’s most-active contract dropped 0.9% to $95.64.
The Dalian contract gained 29% in the first half of 2020, buoyed largely in the second quarter when demand rebounded after China eased its coronavirus-induced restrictions, while concerns emerged over Brazil’s mining operations.
All eyes are on Brazilian miner Vale SA and how the country’s rising tally of COVID-19 cases could affect its production already hampered by a tailings dam disaster last year.
“Vale confirmed it will bring back most of its lost production in the coming months. This gave a signal of easing supply tightness with rising seaborne trades (expected) in the weeks ahead,” ANZ analysts said in a note.
China’s port stockpiles of imported iron ore, which last month dropped to the lowest since October 2016, based on data from SteelHome consultancy, have since steadily climbed, hitting 109.75 million tonnes as of July 3.
Benchmark 62% iron ore’s spot price settled at $101.50 a tonne on Friday, SteelHome data also showed.
Iron ore prices this year are projected to average $79 a tonne, free on board Australia, according to the Australian government’s latest forecast.
The growth in supply is expected to reduce the price to an average $65 by 2022, it said.