Iron Ore Imports Boom as China Mills Go Big Before Curbs End

LAGOS (Capital Markets in Africa) – China’s just imported a gargantuan volume of iron ore. Shipments topped 100 million metric tons in January, the second-highest volume ever and a record for the month, as mills bought more cargoes amid expectations steel output will rebound when winter curbs are lifted.

Purchases swelled to 100.3 million tons, 9.3 percent higher than a year ago, and well above the 84.1 million tons seen in December, according to customs data on Thursday. The record monthly figure in the world’s largest buyer stands at 102.8 million tons, which was set in September.

Iron ore investors have been tracking China’s bid to fight pollution by cutting mills’ output, a drive that’s buttressed prices of higher-quality ores that are cleaner, while fuelling bets that steel demand will snap back when the curbs end. In anticipation, mills have been building up their ore inventory, helping to boost holdings across mainland ports to a record. The January figure is good news for miners including Rio Tinto Group, BHP Billiton Ltd. and Vale SA.

“Steelmakers have carried out large-scale restocking ahead of the relaxation of output curbs in March, which is now showing up in the import numbers, ”Zhao Chaoyue, an analyst at China Merchants Futures Co., said in a text message. “Ore inventories held at mills have risen to historical high levels.”

This week, Goldman Sachs Group Inc.’s Jeff Currie told Bloomberg there’s a global shortage of high-grade ore, and is forecasting a rally to $85 a ton. Lourenco Goncalves, chief executive officer of Cleveland-Cliffs Inc., said at present high grade “hits the ground in China and goes into blast furnace”.

Spot ore with 62 percent iron content in Qingdao was at $77.10 a ton on Wednesday, the highest in almost a month, according to Mysteel.com. Prices have gained for four straight days and are 4.9 percent higher this year.

With the steel restrictions in place, port stockpiles of iron ore have expanded for the past four months — hitting a record 154.4 million tons in mid-January — before easing slightly, according to Shanghai Steelhome E-Commerce Co. Barclays Plc has said lower-quality grades are in abundance at the ports.

There are signs of solid shipments in February, although the headline figure will drop on the shorter month, and the week-long Lunar New Year break in China. Both Brazil and Australia’s Port Hedland dispatched record cargoes for the month of January, some of which will be discharged this month.

Source: Bloomberg Business News