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Vale announced that iron ore 62% Fe reference price averaged USD 89.0/dmt in Q1 of 2020, in line with 4Q19 and 7.8% higher than in Q1 of 2019. Prices started the year at a stronger pace, however, due to the uncertainty brought by the COVID-19, price volatility increased. Prices have outperformed most of other commodities as, in China, blast furnaces production remained firm, electric arc furnaces utilization dropped and domestic concentrate, which is mainly transported by trucks, was impacted by lockdowns and weather-related events, which balanced supply-demand. It said “MB65% index averaged USD 104.3/dmt in Q1 of 2020, 5.8% and 6.7% higher than in Q4 and Q1 of 2019, respectively. In Q1 of 2020, the spread between the MB65% and the 62% iron ore reference price was USD 5.3/t higher than Q4 average, mainly due to a combined effect of supply disruptions in Chinese domestic concentrate together with seasonal lower supply from Brazil, in an environment of strong pig iron production in China.”
It said Short-term outlook is still uncertain in the sense of intensity and timeframe of cuts being adopted by steel mills. European manufacturing is expected to restart in May, however, there are uncertainties regarding the recovery level as a response of how consumer demand and trade flows will recover. The different timing of lockdowns among regions adds another layer of uncertainty, given the complex supply chain links, delaying a global recovery to a healthy level.”