According to a new report issued by the China Iron and Steel Association (CISA), as of July 31 this year imported iron ore inventory at Chinese ports totaled 116 million mt, increasing by 0.66 percent month on month, constituting the first month-on-month rise following the declines recorded in the previous three months. With the increases seen in iron ore shipments, iron ore inventory levels at Chinese ports will continue to rise and ease tightness of supply in the iron ore market.
According to the CISA, as of May 31 the composite steel price index (CSPI) was up 0.05 percent month on month to 109.50 points, while rising by 2.22 percent compared to the beginning of the year. However, as of the same date the China Iron Ore Price Index (CIOPI) was up 3.65 percent month on month, while rising by 66.35 percent compared to the beginning of the year, indicating more rapid increases compared to finished steel prices.
For the July 1-20 period this year, the average aggregate daily crude steel output for all steelmakers in China was estimated at 2.8427 million mt, down 2.57 percent compared to the average level in June this year. Meanwhile, China has been consuming more scrap, resulting in a reduction in demand for import iron ore, which will negatively affect import iron ore prices.
The sharp rises in import iron ore prices have reduced steelmakers’ profitability. In the January-June period of the current year CISA-member Chinese steelmakers recorded a year-on-year decline of 20.51 percent in their aggregate gross profit. Accordingly, steelmakers in China will likely lower their capacity utilization rates, thereby negatively impacting both demand for import iron ore and prices of import iron ore in August, the CISA said. Accordingly, the CISA expects iron ore prices for the Chinese market to indicate a downward correction in August.
