from the brm thread

October 15, 2008

Record high iron ore imports in China bewilders market analysts

Beijing Business Today reported that market analysts are stunned by the September iron ore import figure, hitting a record high of 43.03 million tonnes. This has come against the backdrop of slack demand and weak steel market in recent months. The huge import tonnage is described as confusing and unbelievable by most analysts.

An official statement posted recently at the website of China Customs China imported 350 million tonnes of iron ore in the first 9 months through September up by 22% from the same period last year. The average import price stood at USD 141.3 per tonne up by 77% YoY from a year earlier. However, the Customs has not released the exact import tonnage for September.

According to data released by Ministry of Commerce domestic iron ore price drops 12.4% MoM to CNY 1200 per tonne in late September. Most iron ore producing regions have witnessed price decline, with price falls 11.3% in Tangshan, Hebei and down 15.2% in Chaoyang, Liaoning. Widespread production cut at steel mills has dampened iron ore demand and increased iron ore stock. Moreover, domestic steel price has plunged to the bottom during September 28th to October 10th.

Mr Zhangping a steel analyst told the newspaper that "I'm really surprised to see rising iron ore import in September let alone the peak monthly tonnage. He said that Brazil has halted iron ore supply to China in mid September and steel mills have reduced purchase in the face of production cut and climbing ore imports stock. The monthly import has stayed below 40 million tonnes in last three consecutive months, and we even expect September import to touch the bottom given current sluggish market sentiment."

He said that "One possible explanation is that the Brazilian ore supply has been suspended in middle of the month, and it usually takes 40 days to ship the iron ore from Brazil to China. Therefore, the September figure actually reflects the import volume between late September and mid August during which the iron ore market remains firm. His view is echoed by other market insiders. Nevertheless, the time lead of Australian ore is much shorter, and the import tonnage from there during the period is normal, which can not justify the September figure