(Repeats with no changes to text. The opinions expressed here
are those of the author, a columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, April 3 China's appetite
for iron ore is likely to have continued unabated in March, but
it seems increasingly likely that the first quarter of 2017 may
prove to be as good as it gets this year for imports of the
China imported 90.3 million tonnes of iron ore in March,
according to vessel-tracking and port data compiled by Thomson
Reuters Supply Chain and Commodity Forecasts.
If the estimate is matched by official customs figures, due
next week, it will be only the fifth time that monthly imports
have exceeded 90 million tonnes, the other occasions being
January this year, November and September last year and in
The vessel-tracking and port data is typically more
conservative than customs data, undercounting by 3.5 percent
over 2016, meaning that the risk is that March imports are
higher than suggested by the data.
China's imports of iron ore in the first quarter of 2017
have been robust, mainly on the back of strong steel prices and
optimism about the resilience of the construction and
infrastructure sectors, the main steel consumers.
But there are already signs that the market is realising it
got ahead of itself, with spot iron ore prices .IO62-CNO=MB
ending last week at $80.39 a tonne, down 15 percent from the
peak this year on Feb. 21.
The spot price is now virtually flat from the $78.87 at the
end of last year, showing that the rally from December 2015 to
February, which resulted in prices more than doubling, is
starting to unwind.
Much of the focus on why the price gains were unsustainable
has been on the rapid build-up of iron ore inventories at
Chinese ports, with industry consultants SteelHome saying
stockpiles at 46 ports SH-TOT-IRONINV reached a record 132.5
million tonnes in the week to March 31.
This is some 65 percent higher than the 80.5 million tonnes
recorded in October 2015, just prior to the start of the strong
rally in prices.
While an overhang of inventories was always likely to
eventually cause prices to stumble, it also means that imports
may be subdued in the coming months as traders and steel mills
work through some of the stockpiles.
Chinese steel demand may also become a headwind for iron ore
imports and prices, with the China Metallurgical Industry
Planning and Research Institute estimating it will drop to 660
million tonnes in 2017, a decline of 1.9 percent from 2016.
"We think China's steel consumption will decrease step by
step by step -- maybe increase some years, like last year.
That's our situation," Li Xinchuang, the institute's president,
told an industry conference in Perth on March 30.
Such a decline in domestic demand, coupled with likely lower
steel exports, would likely lead to steel mills lowering output,
thereby cutting their need for imported iron ore.
China's steel exports were 13.17 million tonnes in the first
two months of 2017, down 25.7 percent from the same period last
If this pace is maintained for the rest of the year, steel
exports will reach around 80 million tonnes, well below the
108.5 million recorded in 2016.
Steel prices in China are also feeling the pressure of
possible lower domestic demand and exports, with the benchmark
Shanghai rebar contract, ending last week at 3,166 yuan
($459.50) a tonne, down 6.2 percent from its recent closing peak
on March 15.
For iron ore, it appears the combination of a softer demand
outlook and record high inventories is finally weighing down
While this has yet to show up in China's imports of iron
ore, the risk is that these too start to moderate from the
breakneck pace seen in the first quarter.
(Editing by Joseph Radford)