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Ore stocks decline at Chinese ports

Trading platform Mysteel.com said iron ore stocks at China’s 30 major seaports fell by 1.98Mt or 2.26% to 85.31Mt by the week ending November 16, representing a decline for the third consecutive week. Stocks were 12.78Mt lower than those on November 18 2011, said Mysteel.

Iron ore imports from Brazil dropped 790kt that week, while those from India and Australia fell 600kt and 420kt, respectively. Total stocks of ore from India approached 4Mt, the lowest since 2007, said Mysteel. India is presently restricting ore exports following a ban on some mining activity in the south of the country by the Supreme Court over environmental and permit issues.
The prices of imported ore are less likely to go up in the short term as demand for steel is expected to shrink further during the winter. However, analysts predicted the market will pick up along with an improving economy in the longer term.

China imported 56.43Mt of iron ore in October, down 13.2% month-on-month. The average import price dropped 9.45% from the previous month to US$104.9/t, according to General Administration of Customs data. The price of imported iron ore averaged $163/t in 2011, but it was expected to average  around $130/t this year. The price was expected to continue to fall in 2013.

In the medium term, iron ore supply in both international and domestic markets would increase, which was a main factor for the price dip.

By 2016, there would be an increase of 100Mt output of iron ore concentrates on the domestic market alone, said CISA Deputy Head, Wang Xiaoqi. With regard to the reports that international ore giants would slow down investment, Wang said, “if the investment of a project has reached above 60%, then the pace will not slow down. Projects of those international giants started construction a few years ago with more than 50% of investment [already made].”

If the domestic iron ore price fell below US$100/t, then many analysts believe 30% of domestic ore producers would halt production. However, Wang said the remaining mines could still be profitable at an ore price of $90/t and that the viability of domestic iron ore production was stronger than the market expected. Chinese authorities are considering a move to halve the tax burdens on domestic iron ore companies. The current tax rate is about 25% and the proposed tax cut is to reduce the rate by 10 to 15%.
The performance of China’s iron and steel industry is expected to improve in 2013, but not by very much. The Chinese economy has entered a cycle of slower growth, which meant lower growth in steel consumption. Domestic crude steel output was predicted to rise about 5% in 2013 and net exports of crude steel would remain significant, said Jia Liangqun, a lead analyst with Mysteel.com.

Source: China Metals e-mail infochn@public.bta.net.cn