Imported iron ore prices shooting up in China

SteelOrbis Shanghai After the continuous rise in domestic ore prices, the Chinese mills last week expanded their purchases of imported ore, boosting up the prices at the various ports. Meanwhile, the domestic ore market still maintained its steady upward trend. On January 11, the price of 66-percent damp base iron ore in Tangshan remained constant at RMB 580/mt ($74.5) (tax excluded), while its price in Beipiao Liaoning Province was up RMB 5/mt ($0.6) to RMB 475/mt ($61) (tax excluded). The price quotation of 63.5-percent India fine ore was up RMB 15/mt ($1.9) to RMB 680/mt ($87.3) at Tianjin Port, while the price at Qingdao Port was up RMB 20/mt ($2.6) to RMB 665/mt ($85.4). Finally, the price of Australian Hamersley 62- and 63-percent fine ore at Beilun Port was up RMB 20/mt ($2.6) to RMB 660/mt ($84.7). Due to the climbing domestic ore prices, mills increased their purchases of imported ore, leading to decreased inventory at the ports. From late December, imported ore prices had already begun to move up. Over the past week, however, the ore prices at the major ports saw an overall increase - not a common phenomenon in China's imported ore market. In addition to the bulky purchases of the steel mills, according some market insiders rising freight charges are also contributing to the continuous increase in imported ore. Freight costs saw a large cumulative increase throughout December. At present, the freight rate for India to China's major ports increased $3/mt to $22/mt compared with the end of last year. The freight rate for Tubarao to Beilun/Baoshan increased from $33.64/mt to $35.705/mt. Finally, the rate for West Australia to Beilun/Baoshan increased from $15.77/mt to $16.4/mt. According to newly-released customs data, China's iron ore imports totaled 28.62 million mt in December, up seven percent year on year, indicating a low growth rate. China's iron ore imports saw an obvious slowdown in growth in Q4, totaling 79.15 million mt, i.e., up 4.4 percent year on year. With the growth of pig iron output reaching 19 percent in October and November, decrease in imports is the main reason for November's price increase. China's total iron ore imports for 2006 reached 326 million mt, up 51 million mt or 18.6 percent year on year. This represented a growth decrease of 16 million mt or 13.7 percentage points compared with the previous year. With regards to domestic ore, the market remained steadily up last week, with some regions experiencing supply shortages. The market in eastern China climbed up slightly, while that in the north remained stable. All in all, China's iron ore market is now on a strong upward trend. Due to the soaring finished steel prices, the mills are able to accept higher price levels for iron ore. With the low inventory at the ports boosting the confidence of the traders, the market seems destined to maintain this upward trend in the period ahead.