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China Is Brimming With Iron Ore as Port Stockpiles Hit Another High

Updated on
  • Record holdings enough to cover more than 50 days’ of imports
  • Increase comes as China curbs steel output, miners add cargoes

The mountain of iron ore stacked up at China’s ports is expanding further into uncharted territory, hitting record after record as policy makers in Beijing restrict steel production in the top importer this winter, crimping near-term consumption, while global miners add supply.

The holdings rose for a 14th week to 154.43 million metric tons on Friday, the longest run of gains since 2014, according to Shanghai Steelhome E-Commerce Co. figures. That’s enough to cover more than 50 days’ of imports, based on average daily shipments in 2017, according to Bloomberg calculations.

Iron ore rallied into a bull market last month as the curbs in China are seen underpinning demand for higher-quality ore and paving the way for a snapback in demand when they end, but some analysts are now warning of a slump. Barclays Plc said last week a decline in mills’ profitability after the curbs will spur a switch to lower-quality grades that are in abundance at the ports.

“Iron ore has clearly been oversupplied, and we’re still digesting the traditionally strong fourth-quarter shipments at a time when Chinese steel production is being reduced,” said Ian Roper, head of international business at Shanghai Metals Market. “Fundamentals will become a driving force over prices again, but that’s unlikely in the very near term. Steel demand should do well post-winter restrictions.”

Spot ore with 62 percent iron ore delivered to Qingdao rose 2.5 percent to $76.75 a dry ton on Friday, to pare a weekly decline, according to Metal Bulletin Ltd. So far in 2018, the commodity’s increased 5.7 percent, aiding major miners including Rio Tinto Group, BHP Billiton Ltd., and Vale SA.

Last week, BHP said quarterly iron ore output rose 3 percent on improved rail and operational performance, putting the world’s biggest miner on target for record annual production. Rio reported shipments from Australia jumped 3 percent to 90 million tons in the three months to Dec. 31 from a year earlier.

While steel production in China was a record last year, there’s been a slowdown in output in recent months. Supply in December was down slightly from the same month a year ago, according to government data.

In iron and steel markets on Monday:

  • Iron ore for May fell 0.6 percent to close at 540.5 yuan a ton on the Dalian Commodity Exchange
  • Steel reinforcement bar for May ended at one-month high of 3,927 yuan a ton on the Shanghai Futures Exchange
  • Hot-rolled coil for May dropped 0.6 percent to 3,898 yuan a ton in Shanghai after climbing 2.4 percent last week
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