One Billion Tons of Iron Ore Headed for China as Miners Jump
Iron ore imports by China this year are on course to exceed 1 billion metric tons by a comfortable margin, breaking 2016’s record, after first-half figures showed another jump in cargoes and highlighted the ability of the top steelmaker to absorb rising supplies. Miners’ shares advanced.
Shipments in June were 94.7 million tons, up from 91.5 million in May, according to customs data on Thursday. In the first six months, imports rose to 539 million tons, 9.3 percent higher than the same period in 2016. Last year, China only just beat the 1 billion ton mark, importing 1.024 billion tons.
Asia’s top economy has been pulling in ever-greater volumes of low-cost ore to meet resilient demand from mills, who’ve benefited from rising steel prices in the second quarter. The increase is aiding the largest miners including BHP Billiton Ltd. and Rio Tinto Group, as well as Brazil’s Vale SA, which is bringing on production from its giant S11D project. While iron prices are lower this year, they’ve rebounded since mid-June, gaining for four of the past five weeks.
‘On the Rise’
“Steel output continues to be on the rise, which will boost consumption of iron ore,” said Zhao Chaoyue, an analyst at China Merchants Futures Co., who forecasts that full-year imports of the raw material will reach 1.08 billion tons. “Mills are making chunky profits, so they’re firing up production.”
Spot ore with 62 percent content delivered to Qingdao rose 2.9 percent to $65.91 a dry ton on Thursday, the highest since May 3, after gaining for the fourth time in the past five sessions, according to Metal Bulletin Ltd. Still, prices remain 16 percent lower this year as analysts flagged prospects for rising global production, and a seasonal drop in demand toward year-end.
China’s imports supplement local production, although domestic output is generally of lower quality than supplies from Australia and Brazil. Nationwide exports from Australia may rise to 885 million tons in 2018 and 897 million in 2019, from 851 million this year, according to a government forecast.
Record Stockpiles
While China is drawing in larger volumes, there’s concern that the increases in low-cost production in Brazil and Australia may eventually overwhelm demand, pushing prices lower. Stockpiles of ore held at mainland ports have expanded to unprecedented levels this year.
Goldman Sachs Group Inc. has forecast that prices will average $47 a ton next year as supply rises, and Citigroup Inc. has also predicted a drop. Capital Economics Ltd., which came out first among forecasters in the second quarter, puts the price at $50 at the end of this year.
Miners’ shares gained on Thursday, with one chartist highlighting favorable patterns . In London, BHP climbed for the eighth time in nine days, rallying as much as 1.5 percent in intraday trade to 1,309.5 pence, the highest level since April. Stock in Rio and Anglo American Plc also advanced.
Follow us on social media: