Mining World

China’s iron-ore imports slipped 15% in August from a record in July to their lowest in six months, displaced by growing domestic output which fed record steel production.

China’s steel output jumped 22% to a new peak of 52,3-million tons in August, marking a fifth monthly rise and 616-million tons on an annualised basis, boosted by Beijing’s massive stimulus plan and improving export demand.

Steel exports rose 15% from July, turning the world’s biggest steel producer into a net exporter for the first time since February, as global steel consumption recovered from its worst downturn in decades.

That may result in renewed iron ore supply tightness and a halt in sliding spot prices, analysts said.

Henry Liu, Shanghai-based analyst with Macquarie Bank, said rising steel output outside China could soak up more iron ore and result in a slight reduction in Chinese imports.

He forecast that top miners such as Brazil’s Vale, Australia’s Rio Tinto and BHP Billiton could trim deliveries to China for the rest of the year to meet rising demand in other countries.

Global crude steel output in July reached its highest monthly level so far this year, as producers restart idled capacity to meet rising demand, data from the World Steel Association showed.

China imported 49,68-million tons of iron-ore in August, the lowest since February, customs data showed on Friday, while domestic iron-ore output jumped 19% to 76,7-million tons, bringing total production in the first eight months of this year at 533 million tonnes, up 0,6%.

The surge in iron-ore prices between May and early August to well above this year’s benchmark prices has prompted as many as 80% of China’s closed mines to reopen, according to Macquarie.

Encouraged by China’s record imports, spot iron ore prices nearly doubled in just four months to hit this year’s high of $115/t in early August.

But they have since fallen back by a quarter to trade near the level of annual term prices that China rejects as being too high, as trade slowed and inventories swelled up on slumping Chinese steel prices.

Iron ore stockpiles at China’s major ports rose nearly 3% in August as a result of massive deliveries and some traders refused to take ores, expecting prices would go down further along with sliding steel prices.

MARKET STABILISING

Prices of iron ore and major steel products have stabilised since last week, as a slew of economic data including industrial output, fixed-asset investment and credit lending reassured investors that China’s economy, the world’s third-largest, is on a solid recovery track.

"The increase in steel production in China will weigh on prices. However, it also suggests underlying economic fundamentals remain healthy in China," said Helen Lau, an analyst at OSK Securities in Hong Kong.

Benchmark Indian iron ore delivered in China traded at $82-84 a ton on Friday, little changed from a week ago, while the pace of Chinese spot steel price declines slowed.

"Demand still seems to be strong, driven by internal stimulation of the Chinese government to the economy. International demand is starting to pick up in Japan, Korea and Europe," Russell Scrimshaw, executive director of Australian iron-ore miner Fortescue Metals Group, told Reuters on Friday.

"I don’t think we are going to see any collapse (in prices) but we are still going to see some volatility for some time yet."