Monsoon season may dry up China's ore stockpiles

Monsoon season may dry up China's ore stockpiles

China’s ports indicate a combined inventory of nearly 36 million tons of iron ore – the equivalent of eight months worth of exports from India – and unlike last year, domestic steelmakers are not purchasing ore for the sake of hording. Nevertheless, stockpiles fell 700’000 tons during the past week to 35.65 million tons due to a tapering off of imports as the monsoon season gets underway in India. China’s iron ore import increased 34 percent year on year to 110 million tons in the first five months of 2005 due to speculative purchases at the beginning of the year. Many market players were expecting a rise in iron ore prices due to Beijing’s steel policy. However, the new policy discourages the exports of low-end, high-energy consuming steel products. The government removed the export tax rebate on billets and slabs in April, and the rebate on steel alloy, pig iron, coke and steel scrap exports was cancelled recently. Meanwhile, the government continues to encourage the steel industry to consume imported raw materials such as iron ore, pig iron, coke and scrap. However, as the recent price decreases show, the steel output of the country well exceeds the consumption; therefore, it may be some time before a large scale decrease in the iron ore stockpiles of Chinese ports occurs. Yet, some market players expect that a drop-off in imports from India during the monsoon season will be just the cure for the excessive stocks in China’s ports.