(Repeats earlier story with no change to text for wider
readership. The opinions expressed here are those of the author,
a columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia May 4 The heat came out
of China's iron ore imports in April, with vessel-tracking and
port data suggesting a decline of several million tonnes from
the near-record levels recorded in March.
A total of 83.27 million tonnes of the steel-making
ingredient was discharged at Chinese ports in April, down 3.7
percent from March's 86.46 million, according to data compiled
by Thomson Reuters Supply Chain and Commodity Forecasts.
It's worth noting that the vessel-tracking and port data
typically comes in below the official Chinese customs data,
which reported 95.56 million tonnes of iron ore imports in
March, the second-highest on record.
Nonetheless, the ship data does point to lower imports in
April, most likely in the order of 3 million tonnes. Apart from
a weak month in February, most likely related to the Lunar New
Year holidays, the vessel-tracking figures show April to be the
weakest month for iron ore imports since September last year.
It also appears that much of the decline in iron ore imports
was borne by Australia, China's largest supplier, with the data
showing imports of 53.9 million tonnes in April, down from 58.9
million in March.
In contrast, number two supplier Brazil saw Chinese imports
of 18.48 million tonnes in April, up from March's 16.54 million.
The lower imports from Australia in April are most likely the
result of earlier weather-related disruptions in the main
producing area of Western Australia state that affected both
mines and rail networks.
This means imports from Australia are likely to recover
again in May, which may be a bearish signal for prices if miners
such as Rio Tinto, BHP Billiton and Fortescue
Metals Group decide to chase volumes over prices.
This can already partly be seen by the 11 percent jump in
iron ore shipments from Port Hedland, the terminal used by BHP
and Fortescue, to 34.86 million tonnes in April from 31.5
million in March. This tallies with the Chinese import numbers
from Thomson Reuters, given the sailing time of around two weeks
between northwest Australia and China.
Ultimately iron ore prices are driven by steel prices and
margins, and here the outlook is less certain, with the main
Shanghai rebar contract trending lower in recent weeks.
It hit a peak of 3,440 yuan ($499) a tonne on March 15, but
slipped 9.2 percent since then to Wednesday's close of 3,123
yuan, as doubts emerged among market participants over the
resilience of China's infrastructure and construction spending.
While Chinese steel output has remained robust so far this
year, the market seems to be swinging toward the view that
margins will be under pressure in the second half of the year as
domestic demand growth slows and exports struggle.
Already Chinese steel mills are seeing lower exports, with
shipments of products sent overseas slumping 25 percent to 20.72
million tonnes in the first quarter of this year compared to the
same period last year.
While exports are by no means the key factor for the 800
million tonnes-a-year Chinese steel sector, a significant
downturn is another bearish factor for the industry.
Spot Asian iron ore prices .IO62-CNO=MB have performed
worse than Chinese steel rebar futures in recent weeks, dropping
28 percent from a peak of $94.86 a tonne on Feb. 21 to $68.68 on
The sharp decline is partly due to the strong rally over the
past 13 months, which saw prices almost triple, sending iron ore
to levels that appeared well overbought, given the market
remains well supplied and will have to absorb more than 100
million tonnes of new low-cost production from Australia and
Brazil this year and next.
While China buys about two-thirds of seaborne iron ore, this
still leaves one-third that can influence the market, and here
the recent news has been fairly positive for the major
Japan's imports of iron ore in April reached the highest
since vessel-tracking data started in January 2015, with 11.62
million tonnes discharged during the month, up from 10.45
million the prior month.
Asia's third-largest importer, South Korea, saw 7.17 million
tonnes offloaded in April, the most since October 2015,
according to the data.
While import volumes in Japan and South Korea are dwarfed by
China's, it does show signs of health in the steel sectors in
those countries, which is overall a mild positive for seaborne
iron ore demand.
The picture that is emerging is that April's dip in China's
iron ore imports is likely related to earlier weather issues in
Australia, and, given that shipments have already recovered,
there is unlikely to be any supply tightness.
This leaves the price exposed to Chinese demand, and here
the outlook is less certain and will depend on how much spending
stimulus the authorities in Beijing deem appropriate.
(Editing by Christian Schmollinger)