China iron ore and pellet imports hit record high in CY’20, up 9% y-o-y

China- the world’s largest iron ore consumer and importer recorded imports of iron ore at 1.17 bn t in CY’20, according to the General Administration of Customs. The imports have hit a record high.

The country’s import moved up by 9% on compared to 1.069 bn t in CY’19. The imports picked up on rising demand triggered by infrastructure spending to facilitate economic recovery amid the coronavirus pandemic. In China, capacity utilization rates at 163 mills for second half of CY’20 were hovering above CY19 levels. However, on a monthly basis, China’s iron ore imports fell to 96.75 mn t in Dec’20 as against 98.15 mn t in Nov’20.

Key market drivers for Chinese iron ore industry in CY’20

• Iron ore prices surged in CY’20- The yearly average global iron ore fines (Fe 62%) prices increased to $108/t CFR China in CY’20 as against $93.5/t CFR China in CY’19. Thus on y-o-y basis prices increased by 16%. Spot iron ore fines (Fe 62%) fines index increased to nine years high to $177/t CFR China in the last week of Dec’20.
  
  
  
• Australia’s iron ore exports to China rise- Australia’s iron ore export shipments were recorded at 874.96 mn t for CY’20. Shipments increased by 3% as against 848.15 mn t in CY’19, according to the vessel line up data maintained with SteelMint. China was the largest importer at 728.4 mn t (up 4% y-o-y).
• Indian iron ore export shipments to China up sharply in CY’20- China continued to remain the largest importer of Indian iron ore for the year CY’20 at 38.13 mn t against 16.56 mn t in CY’19, as per data compiled with SteelMint.
• Few key miners lowered iron ore output guidance – Vale in its press release on 2nd Dec’20 notified that the company has reduced its iron ore production guidance to 300-305 mn t as against previously set guidance at 310-330 mn t. Anglo American has recently notified a reduction in its iron ore production guidance for 2020. The miner has reduced the guidance to 37 mn t for Kumba iron ore against previously set guidance at 37-39 mn t.
• DCE steps in to check sharp rise in iron ore futures- On 21 Dec’20, the most-traded May 2021 DCE iron ore contract closed at RMB 1,144.5/dmt ($175/dmt), up another RMB 101/dmt from the settlement price on 18 Dec’20. The Dalian Commodity Exchange (DCE), stepped up curbing measures to manage iron ore futures markets by controlling the new open interests of any DCE iron ore contracts within 2,000 lots/day to minimize speculative trading.

Outlook: On 31st Dec’20, the Ministry of Industry and Information Technology jointly issued a notice to confirm the free import of recycled raw material for steelmaking with effect from 1st Jan’21. The new standard is likely to boost Chinese ferrous scrap import volumes. China imported around 0.02 mn t of ferrous scrap in CY’20 as against 2.32 mn t in CY’17.The new standards are likely to displace some quantum of iron ore imports in China and may become a gamechanger for global iron ore market