China's iron ore prices rose slightly in July driven by increases in steel prices in the domestic market, and are likely to remain volatile in the coming months as the steel output declines, an industry association said.
The China Iron Ore Price Index (CIOPI) rose to 433.97 points at the end of July, up 9.5 points or 2.24 percent from the end of June, data released by the China Iron and Steel Association (CISA) showed.
Domestically produced Iron Ore Price Index, a sub-index of the CIOPI, rose 349.41 points at the end of July, an increase of 2.4 percent from the previous month-end, while the Iron Ore Import Price Index, the other sub-index, increased to 468.34 points, up 2.19 percent month-on-month, the data showed.
"The output of crude steel dropped month-on-month in May and June and the inventory also fell year-on-year starting from March," Qu Xiuli, a deputy secretary-general at the CISA, told the Global Times.
"Most importantly, the steel prices have dropped to the lowest level in the first half of the year and could not fall any further. So the prices rebounded slightly in July, driving up the prices of iron ore," Qu said.
The China Steel Price Index (CSPI) rose 100.48 points at the end of July, up 1.99 percent from the previous month-end, data from the CISA showed.
The data came after the CISA said last week that the main business of its member steel enterprises was still running in loss in the first half of the year due to the rising cost and overcapacity.
"Although the iron ore price is still likely to rise, it is unlikely to rise significantly in coming months because the output of crude steel will fall and thus steel prices will also drop," the CISA said in a statement.
"The price rise of steel and iron ore in July was also driven by improved market confidence thanks to a series of government measures to stabilize the economy," Wang Guoqing, a senior analyst at Beijing Lange Steel Information Research Center, told the Global Times.
The government has issued a raft of measures including accelerating shanty town rebuilding, speeding up railway construction and eliminating outdated industrial capacity in a bid to stabilize the economic growth, which slowed to 7.6 percent in the first six months.
"With the expectation of new policies, which might be adopted at the economic work conference to be held in the second half of the year, and acceleration of infrastructure construction, demand will improve in the third quarter," Wang said.
"As the government holds a tight grip on creation of new capacity and projects, the measures to boost shanty town and infrastructure construction will not create a new round of overcapacity in the steel industry," Qu from the CISA said.
Source: Global Times