Iron ore prices are likely to rebound as closure of high-cost output supplying mines in China may boost demand for seaborne shipments, said Citigroup in its latest study report.
According to Citigroup analyst, local suppliers are seen cutting production. Iron ore mines are being shuttered in the country on a regular basis. The imported iron ore is rather cheaper than the domestically produced ore. There is a visible shift to imported ore. Citigroup reiterated its bullish view on the raw material and stated that iron ore prices are likely to average at $100 per ton during the fourth quarter of this year.
The report states that there is a robust support for iron ore at $90 per ton and the prices are unlikely to drop below that. The benchmark prices in China rose 2.2% last month. The decreasing supply from Chinese producers due to mine closures will continue to keep the iron ore supply under pressure. According to estimates provided by China Metallurgical Mining Enterprise Association, between 20% and 30% of the iron ore mines in the country have closed down. Local production is expected to decline by 16% in 2014.
Meanwhile, stockpiles at Chinese ports fell 0.9% to 112.65-million tons in the week to June 27 from a record 113.65-million tons a week earlier, according to Shanghai Steelhome Information Technology.