China, world’s largest iron ore consumer, consumed around 953 MnT iron ore in 2015 via imports. Iron ore inventories at major Chinese ports touches around 100 MnT, which is highest since May’15.
These iron ore holdings at major Chinese ports was due to increased supplies of low cost output from major iron ore producers namely Australia and Brazil. On the other hand, the lesser procurement by Chinese steel mills owing to ongoing production cut and shutting down of steel mills are reasons behind increase in port stocks.
As we have mentioned earlier in our reports, China imported all time high iron ore i.e. 953 MnT in 2015. Also, there was 17% M-o-M increase in imports in Dec’15 (96.2 MnT), all time monthly high. Increase in imports have seen on grounds of strong shipments from overseas as well as Chinese slowing demand from real estate and infrastructure.
Rio Tinto and Vale have expanded their production even after weak China’s steel output and dull demand. Market analysts anticipate that the increase in stockpiles will add more pressure to global iron ore prices, in result of which prices may drop down to USD 30/MT in coming term.
Iron ore prices have already been pummeled over a past three years due to increase in supplies from Australia and Brazil. Starting Dec’15, prices dropped down to all time low at USD 37/MT, however, currently gained to USD 40.2/MT, CFR China on 15 Jan’16. Apparently, this gain is not solid and prices are likely to fall again before Lunar New Year holidays in early February.
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