Chinese steel producers’ firm demand for imported iron ore may extend for another month in October, while overall iron ore supply in China’s market will remain steady this month, according to Mysteel’s new monthly report.
Mysteel expected Chinese steelmakers’ daily hot metal output to stay relatively high throughout October albeit some limited reductions, explaining that steel margins earned by mills will maintain the current low level without shrinking by a large degree in the short term.
In September, many steel producers, especially those in North and East China, were resuming their blast furnaces that had been idled or banked before, as they could still enjoy some margins on selling finished steel, Mysteel Global noted.
For example, steelmakers in North China’s Hebei made an average profit of Yuan 82/tonne ($11.5/t) for rebar they sold last month, up Yuan 59/t on month, Mysteel’s survey found.
Subsequently, Mysteel’s survey on 247 Chinese steelmakers showed that their daily hot metal output rose to around 2.4 million tonnes/day on average during September 23-29, up by 3% from that of August 26-September 1 to touch a new high since mid-June. The increase in output slowed down towards the end of September due to mills’ thinner margins, however.
Also, “though steelmakers across the country may be mandated to curtail their output since mid-October to meet China’s goal of lower crude steel output in 2022 than last year, many market pundits still anticipate a further recovery in finished steel consumption by downstream users this month,” the report noted.
Last month, Chinese steelmakers’ production enthusiasm was triggered by improved steel demand, which also reinforced market confidence that demand will stay firm during September-October – a traditional peak season for steel consumption.
In fact, total stocks of five major finished steel products including rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate held by Chinese trading houses under Mysteel’s survey thinned by 1.3 million tonnes from those over August 26-31 to 17.4 million tonnes over September 23-29, despite the increase in mills’ steel output. Significantly, the inventories were also 20% lower on year.
On the other hand, tightened supply of China’s domestic iron ore this month means that mills’ firm demand for iron ore will have to transfer to imported products, Mysteel’s report pointed out.
Some iron ore miners in North China’s Hebei and Shanxi were subject to safety checks and had halted their production since early September after two local mining accidents took place. And mining suspension in Hebei will last until the end of this month, as reported.
In addition, authorities in Hebei had also imposed a ban on the distribution and use of explosives among local mining companies since late September, to reduce the risk of accidents prior to the convening of the 20th National Congress of the Communist Party of China in Beijing from October 16, Mysteel Global noted.
Accordingly, the availability of China’s domestic iron ore concentrates will be lower in October. Nevertheless, the country’s overall iron ore supply will remain largely stable as Chinese ports are set to receive more new ore deliveries from overseas miners this month, after they had beefed up their shipping towards the end of the prior quarter.
The report also noted that China’s portside inventories of imported iron ore may decrease further this month despite more new arrivals, given that steelmakers’ demand for imported ore will remain relatively healthy.
Over September 23-29, total iron ore stocks at 45 Chinese ports under Mysteel’s survey declined to 130.8 million tonnes, down by 9.6 million tonnes from that over August 26-September 1. The destocking was partly driven by mills’ enthusiasm in hauling ore from ports to plants with their steady production resumption, as reported.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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