China's domestic ore supply sees reduction

Since the northern-based mines and ore dressing plants continued to suffer the effects of bad weather during the past week, the Chinese iron ore market experienced shortages of supply and so market prices moved up steadily. Meanwhile, some traders began to sell imported ore, causing a decline in Indian ore prices. Inventories at the ports saw a slight increase. By the end of trading on March 15, the price of 66-percent damp base iron ore in Tangshan remained unchanged at RMB 605/mt ($78.2) (tax excluded), while its price in Beipiao Liaoning Province was up RMB 5/mt ($0.6) to RMB 530/mt ($68.5) (tax excluded). The price quotation of 63.5-percent India fine ore was down RMB 20/mt ($2.6) to RMB 790/mt ($102.1) at Tianjin Port, while the price at Qingdao Port has dropped RMB 20/mt ($2.6) to RMB 750/mt ($96.9). Finally, the price of Australian Hamersley 62- and 63-percent fine ore at Beilun Port was constant at RMB 755/mt ($97.5). Over the past two weeks, the northeastern, northwestern, and northern Chinese regions have experienced continued heavy rain and snow, seriously affecting the normal production of northern mines and ore dressing plants. Moreover, iron ore transportation was also hindered by the bad weather. In spite of the many inquiries being made, the actual level of concluded trade is low. Due to the steadily rising quotations from the mines and dressing plants, the northeastern market climbed up by a small margin. Aiming at controlling the rising imported ore prices, mills adjusted the purchase price level of imported ore by taking advantage of the high inventory at the ports. Furthermore, it still remains uncertain whether India's new iron ore export tariff will actually be implemented. As a result, some traders started to sell their products during the past week, leading to a decline in quotations. By the end of the previous week, the total iron ore inventory at China's twenty-three major ports had already amounted to 44.73 million mt, slightly up by the amount of 100,000 mt compared with the pre-festival period. The price quotation of 63.5-percent India fine ore was $90/mt CFR. Currently, there are a number of factors exerting an impact on China's iron ore market. These may be summarized as follows: With regard to supply; First, the inventory levels of the mines and dressing plants are not very high and there are many inquiries coming to these ore producers. Thus, upward momentum is seen in quotations. Second, although the imported ore market saw a decline last week, its present price still stands at a relatively high level. Third, Australia's west coast has been virtually closed down due to the recent typhoon which hit the region. As a result, iron ore cannot be shipped from the area and this will probably affect arrivals for the coming month. Fourth, Hebei Provincial Government has moved to implement regulatory measures on mine resources. This impacts negatively on the production and survival of medium and small mines. Fifth, Chinese mills still have doubts as to whether India's export duty on iron ore will actually be implemented. Sixth, China's iron ore output continues to see rapid growth. The latest data show that Chinese iron ore output totaled 83.664 million mt in the first two months of this year, up 26.74 million mt or 47 percent year on year. With regard to demand; First, it is time for the steel mills to build up their stocks now. Second, China's pig iron output is seeing accelerated growth, with Jan-Feb pig iron output standing at 70.066 million mt, up 12.149 million mt or 21 percent year on year. The growth is 1.1 percentage points higher compared with the same period last year. The iron ore market maintained a steady trend over the past week. However, on the whole, the developing market trend is going against the mills. As the inventory at the ports continues to go down, the mills will have to accept a markup in price. Thus, the market in the period ahead is expected to see steady upward movement.