The correction of global iron ore, scrap and billet prices continued last week, as the market’s fundamentals remain weaker than at the beginning of this year. While the price reductions could slow down going into Q2, it is likely that the peak levels for 2018 have already been reached in the market and that further recoveries to levels beyond those registered in January/February are unlikely.

Last week, iron ore prices settled at around $63/t CFR Qingdao, $15/t below this year’s peak so far at the end of February and the level registered in early April 2017. The fall has taken the prices back to the levels of April 2016, a year in which the average annual price of iron ore stood at just some $60/t CFR Qingdao.

Confirming the bleak outlook for iron ore prices going forward, Australia’s Department of Industry, Innovation and Science has revised upwards its iron ore price forecasts for this year, but this still remains below the current spot levels. It now expects 62% Fe fines to average $61.80/t in 2018, compared to its previous forecast of $52.60/t. In 2019, it also expects iron ore to average $51.10/t rather than $48.80/t.

So far this year, the Kallanish 62% Fe index has averaged $73.07/dmt, suggesting prices are still set to decline into the $50s to bring the average for the year down. The Australian report notes two key factors putting pressure on prices. The first is a levelling off of China’s iron ore imports. After topping out at 1.08 billion tonnes in 2018, it expects imports to dip to 1.04 billion tonnes by 2023. The second factor is higher low-cost, high-Fe supply from Brazil. That is mainly for Vale’s S11D project which will eventually be shipping 90m t/y of high grade fines.