Iron ore in­ven­to­ries drop as steel mills re­plen­ish hold­ings

China Daily (Canada) - - FRONT PAGE - By BLOOMBERG

Iron ore in­ven­to­ries at ports in China, the largest im­porter of the steel-mak­ing raw ma­te­rial, fell to their low­est level in almost 11 months on Tues­day, as mills re­plen­ished hold­ings after prices fell and lo­cal out­put slowed dur­ing the win­ter.

The stock­piles dropped 0.9 per­cent to 100.6 mil­lion tons by Jan 2, shrink­ing for a sixth week, ac­cord­ing to data from Shang­hai Steel­home In­for­ma­tion Tech­nol­ogy Co.

That is the low­est level since Fe­bru­ary last year, and the sixth weekly de­crease is the long­est run of de­clines since April 2013. The in­ven­to­ries are 12 per­cent lower after peak­ing at 113.7 mil­lion tons in July.

While iron ore re­treated 47 per­cent last year as global out­put ex­panded, prices opened 2015 with the big­gest weekly gain in 18 months amid spec­u­la­tion China will take more steps to spur growth.

The coun­try is ac­cel­er­at­ing in­fra­struc­ture projects val­ued at 7 tril­lion yuan ($1.1 tril­lion), ac­cord­ing to in­dus­try sources. Some ore mines in China typ­i­cally close dur­ing the win­ter, and last year’s slump in prices spurred spec­u­la­tion that not all of them will re­open this year.

“Re­stock­ing by mills, plus the sea­sonal fac­tor of north­ern Chi­nese mines clos­ing for win­ter” drove the stock­piles lower, said Philip Kirchlechner, di­rec­tor of Iron Ore Re­search Pty in Perth, Aus­tralia, adding that if the mines stay shut after the win­ter, it “is a pos­si­ble sus­tain­ing fac­tor for prices”.

Ore with 62 per­cent con­tent de­liv­ered to Qing­dao re­treated 0.6 per­cent to $70.87 a dry metric ton on Mon­day, the first de­cline in seven ses­sions, ac­cord­ing to Metal Bulletin Ltd. The price which fell to $66.84 on Dec 23, the low­est level since June 2009 ral­lied 5.8 per­cent in the week to Jan 2.

Data on Tues­day showed that ship­ments of ore to China from Aus­tralia’s Port Hed­land, the world’s big­gest bulk-ex­port ter­mi­nal, rose in De­cem­ber after Brazil said on Mon­day it ex­ported the most iron ore in the same month since 2005.

Ex­ports through Port Hed­land for China reached 30.6 mil­lion tons from 29 mil­lion in Novem­ber, ac­cord­ing to port data. Ex­ports through the port to all coun­tries in 2014 surged to 414 mil­lion tons from 318 mil­lion tons in 2013, ac­cord­ing to Bloomberg cal­cu­la­tions.

Many high-cost mines in north­ern China that shut over the win­ter may not re­sume pro­duc­tion this March, Cit­i­group Inc said in a Nov 11 re­port.

Lo­cal out­put will drop 30 per­cent to 236 mil­lion tons this year, HSBC Hold­ings Plc said on Oct 22.

The stock­piles at Chi­nese ports were 13 per­cent above the five-year av­er­age of 89.04 mil­lion tons, ac­cord­ing to Bloomberg cal­cu­la­tions. The coun­try pro­duced 19 per­cent more crude steel in the first 11 months of last year than all of 2010, data by the World Steel As­so­ci­a­tion show.

China’s econ­omy is likely to have ex­panded in 2014 at the slow­est pace since 1990 as growth was con­strained by a hous­ing slump and fac­tory-gate de­fla­tion. The world’s sec­ond­largest econ­omy, which cut in­ter­est rates in Novem­ber, buys two-thirds of seaborne ore.

The gov­ern­ment ap­proved the ac­cel­er­a­tion of 300 projects this year as part of a broader 10 tril­lion yuan plan to run through 2016, ac­cord­ing to in­dus­try sources. The in­vest­ments will be across seven in­dus­tries in­clud­ing oil-andgas pipe­lines, trans­porta­tion and min­ing, ac­cord­ing to the peo­ple.

“Chi­nese end-user de­mand will re­main pretty soft,” said Ivan Sz­pakowski, an an­a­lyst at Cit­i­group in Hong Kong, dur­ing a Bloomberg Tele­vi­sion in­ter­view.

“Over the course of the year, sup­ply will be in­creas­ing very strongly. We see prices fall­ing into the $50s.”

Ship­ments from Brazil, the big­gest ex­porter after Aus­tralia, rose 18 per­cent to 37.4 mil­lion tons in De­cem­ber from a year ear­lier, ac­cord­ing to data on Mon­day. That is the high­est level in at least nine years as Vale SA boosted out­put.

ZHANG LEI / FOR CHINA DAILY

Iron ore be­ing un­loaded at Rizhao Port, Shan­dong prov­ince. The stock­piles at Chi­nese ports are 13 per­cent above the five-year av­er­age of 89.04 mil­lion tons, ac­cord­ing to Bloomberg cal­cu­la­tions.

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