Iron-ore: Supply to rise, demand to be impacted by restrictions in Chinese steel market – Vale

Dhwani Mehta FXStreet

Amid the recent surge in metals’ prices, Vale S.A, a Brazilian mining giant, offers his outlook on iron ore, as they expect supply to increase while demand to weaken in the coming months.

Key quotes

“Going forward on the year, on the supply side, volumes shall increase compared to 2H20”

“While iron ore demand might be impacted by production cuts due to environmental restrictions in China.”

“Going forward, the Chinese steel market is concerned about further policy restriction - given the good steel margins, mills will look to accelerate steel production before NDRC and MIIT capacity control policy materializes.

This comes after the price of the ferrous metal surged to a fresh record high on Monday. “Iron ore futures on the Dalian Commodity Exchange, for September delivery, closed 4.3% higher at 1,145 yuan. The contract jumped 6.3% earlier. Chinese steel futures also closed at all-time highs,” per Mining.com.

Market implications

Amid expectations of worsening fundamentals for iron ore, the prices could take a hit while negatively impacting the Australian dollar. Note that iron ore is Australia’s top export.

At the time of writing, AUD/USD trades around 0.7790, down 0.13% on the day, having hit fresh four-day highs at 0.7815 on Monday.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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