Iron Ore Inventory at China Ports Contracts to 11-Month Low

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Iron ore inventories at ports in China, the largest importer of the steel-making raw material, fell to the lowest level in almost 11 months as mills replenished holdings after prices fell and local output slowed during the winter.

The stockpiles dropped 0.9 percent to 100.6 million tons as of Jan. 2, shrinking for a sixth week, according to data from Shanghai Steelhome Information Technology Co. That’s the lowest level since Feb. 14, and the sixth weekly decrease is the longest run of declines since April 2013. The inventories are 12 percent lower after peaking at 113.7 million tons in July.

While iron ore retreated 47 percent last year as global output expanded, prices opened 2015 with the biggest weekly gain in 18 months amid speculation China will take more steps to spur growth. The country is accelerating infrastructure projects valued at 7 trillion yuan ($1.1 trillion), according to people familiar with the matter. Some ore mines in China typically close during the winter, and last year’s slump in prices spurred speculation that not all of them will reopen this year.

“Restocking by mills, plus seasonal factor of northern Chinese mines closing for winter” drove the stockpiles lower, Philip Kirchlechner, director of Iron Ore Research Pty in Perth, Australia, said by e-mail. If the mines stay shut after the winter, it “is a possible sustaining factor for prices.”

Ore Price

Ore with 62 percent content delivered to Qingdao retreated

0.6 percent to $70.87 a dry metric ton yesterday, the first decline in seven sessions, according to Metal Bulletin Ltd. The price -- which fell to $66.84 on Dec. 23, the lowest level since June 2009 -- rallied 5.8 percent in the week to Jan. 2.

Rio Tinto Group climbed 1 percent to 2,913 pence in London by 11:58 a.m. local time, while BHP Billiton Ltd. fell 0.4 percent to 1,311 pence. In Sydney, Fortescue Metals Group Ltd. ended 1.1 percent lower after as losing as much as 5.3 percent in intraday trade.

Data today showed that shipments of ore to China from Australia’s Port Hedland, the world’s biggest bulk-export terminal, rose in December after Brazil said yesterday it exported the most iron ore in the same month since 2005. Exports through Port Hedland for China reached 30.6 million tons from 29 million in November, according to port data. Exports through the port to all countries in 2014 surged to 414 million tons from 318 million tons in 2013, according to Bloomberg calculations.

High-Cost Mines

Many high-cost mines in northern China that shut over the winter may not resume production this March, Citigroup Inc. said in a Nov. 11 report. Local output will drop 30 percent to 236 million tons this year, HSBC Holdings Plc said on Oct. 22.

The stockpiles at Chinese ports were 13 percent above the five-year average of 89.04 million tons, according to Bloomberg calculations. The country produced 19 percent more crude steel in the first 11 months of last year than all of 2010, data by the World Steel Association show.

China’s economy probably expanded in 2014 at the slowest pace since 1990 as growth was constrained by a housing slump and factory-gate deflation. The second-largest economy, which cut interest rates in November, buys two-thirds of seaborne ore.

Premier Li Keqiang’s government approved accelerating 300 projects this year as part of a broader 10 trillion yuan plan to run through 2016, according to the people familiar with the matter, who asked not to be identified. The investments will be across seven industries including oil-and-gas pipelines, transportation and mining, according to the people.

‘Pretty Soft’

“We think that Chinese end-user demand will remain pretty soft,” Ivan Szpakowski, an analyst at Citigroup in Hong Kong, said in a Bloomberg Television interview yesterday. “Over the course of the year, supply will be increasing very strongly. We see prices falling into the $50s.”

Shipments from Brazil, the biggest exporter after Australia, rose 18 percent to 37.4 million tons in December from a year earlier, according to data yesterday. That’s the highest level in at least nine years as Vale SA boosted output.

Brazil expects increased iron ore production this year, according to Foreign Trade Secretary Daniel Godinho. Still, there’s no sign of recuperating commodity prices, Godinho told reporters yesterday.