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Chinese Steelmakers Boost Use of Domestic Iron Ore, Mysteel Says

Jan. 14 (Bloomberg) -- Steelmakers in China, the world’s biggest iron ore importer, are using more domestic supplies of the raw material after a rally in the price of imports, according to Mysteel.com.

Domestic ore accounted for 84.1 percent of the fines used to process into pellet feed and 28.2 percent of the ore used to produce sinter feed as of Jan. 11, up from 80.1 percent and 26.2 percent respectively reported on Dec. 21, the researcher said in a survey report of 60 smaller mills on its website. Pellet and sinter feed are both used in blast furnaces to make iron in steel production.

Iron ore delivered to ports in China surged to $158.50 a dry ton on Jan. 8, the highest in almost 15 months. Steelmakers including Jianlong Steel Holdings Co., China’s third-largest non-state mill, and Zenith Steel Group Corp. said last week they’d like to buy more local ore, even as the nation’s coldest winter in 28 years keeps domestic mines closed and local supplies limited.

“Mills are more willing to use domestic ore to tame the rise in raw-material costs,” Xie Yingwu, a Shanghai-based analyst with Mysteel.com, the nation’s biggest iron and steel researcher, said in the report.

Ore with 62 percent iron content delivered to China’s northern port of Tianjin jumped 83 percent to $158.50 a ton last week, rebounding from an almost three-year low reached on Sept. 5, according to a gauge compiled by The Steel Index Ltd. Prices declined 2.1 percent, the biggest drop since Sept. 24, to $154.90 on Jan. 11.

Cheaper Ore

Iron ore from Australia arriving at China’s northern city of Qianan is 40 yuan ($6.43) to 50 yuan a dry ton more expensive than domestic fines, Xie said Jan. 11. China’s ore contains about 20 percent iron, compared with more than 55 percent iron in Australian ore, making it more expensive to extract.

Iron ore inventories for pellet-making, in which domestic ore is mostly used, climbed to 3.41 million tons as of Jan. 11, from 2.83 million tons on Dec. 21, the report said. Ore inventories for sinters, in which imported ore accounts for 72 percent, declined to 2.25 million tons from 2.35 million tons during the same period, it said.

A recovery in local supplies of iron ore isn’t expected until March with cold weather in northern China making it impossible for supplies to resume, Mirae Securities Co. analysts Henry Liu and Shirley Zhao said in an e-mailed note last week.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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