China's iron ore imports decline sharp in mid-summer

SteelOrbis Shanghai Chinese iron ore prices moved stable week on week, with brisk commercial activities. Influenced by the sharp drop in the arrival of imported ore in July, the inventory at ports saw a continuous decline. The rainy weather in northern China in earlier times had brought some negative impacts on the iron ore production in Hebei area, leading to insufficient supply in the market and low iron ore stocks for various steel mills. Besides, domestic steel market is in an overall stable trend with slight rise in pig iron and semis markets; therefore, steel mills are active in making purchase, which results in the brisk commercial activities compared with the previous week. Although the prices did not see any remarkable increase in southern China, the market has become tighter. That is because, steel mills are always trying to suppress the climbing of iron ore prices, but traders are not willing to accept selling at low price levels due to the high costs of their goods. Influenced by this, the local mines are still waiting. Since the freight is moving up and down at a high level, the cost of imported ore is expected to increase in the short term. Therefore, steel mills have strengthened their iron ore purchases. Sources reported that, no arrival of Brazilian iron ore is expected at the ports until late-September. However, if we calculate the price of Brazilian iron ore considering the fixed price and current freight, the CIF price of 64-65 percent Brazilian ore appears as $88/mt. On the other hand, influenced by the sharp drop in the arrival of imported ore in July, the inventory at ports saw a rapid decline. In the end of the previous week, the total inventory of iron ore in China's twenty-three major ports was 40.68 million metric tons, down 910,000 metric tons week on week. This is a sharp drop compared with the highest inventory level of 43 million metric tons this year. On August 25, General Administration of Customs announced that, Chinese imports of iron ore for July increased 14.5 percent to 24.70 million metric tons compared with the same period of last year. From January to July, cumulative imports of iron ore totaled 186.1 million metric tons, up 21.7 percent year on year. However, on a monthly aspect for this year, in July, ore imports declined to the one of the lowest monthly levels of this year. The quantity in July is only 130,000 metric tons more than May and 4 million metric tons lower than June. The rapid decrease in imports is one of the reasons which prevented iron ore prices from falling sharply while the steel prices were in the downward spiral. In the beginning of September, both the supply and demand in steel market are expected to increase. Therefore, the demand for iron ore will also increase. With relatively low inventory level of both domestic and imported ore currently, prices are expected to increase in the future.