China witnesses iron ore import slowdown
Iron ore imports to
China began to decline soon after the new import licensing system took effect on March 1, 2005.
Beijing introduced the licensing system in an effort to curb “blind imports” of
iron ore into
China.
A slowdown in
iron ore shipments over the last three weeks to the world's largest importer of
iron ore seems to be a testament to the effectiveness of the new system.
Reportedly, the licensing system has not impacted major importers of
iron ore to
China; however, minor traders are definitely feeling the pressure due to tightened government control on low-grade
iron ore.
Prior to the introduction of the licensing system,
China's ports were plagued by congestion because importers would snap up
iron ore off the spot market, regardless of whether or not there were customers in the Chinese market. While the Chinese ports still show high inventories of
iron ore, traffic into the ports began to ease during March.
The slowdown in
iron ore imports mostly affects Indian
iron ore producers because their ore is sold on the spot market in
China, while ore from
Brazil and
Australia is sold on fixed contracts.