China Iron Ore Imports to Stall Next Year
China’s iron ore imports may fail to increase next year for the first time since at least 1999 because of slowing demand from steel mills, an industry group said.
Imports may remain at 400 million metric tons next year, unchanged from 2008 levels, Zou Jian, chairman of the China Metallurgical Mining Enterprise Association, said in an interview yesterday in Beijing. The demand slump will show up in import figures in the next two months, he said.
China this week announced a 4 trillion yuan ($586 billion) stimulus plan to revive growth in the world’s fourth-largest economy, investing in housing, railways, roads and airports. Contract iron ore prices may drop next year, the first in seven, hurting profits at Cia. Vale do Rio Doce, Rio Tinto Group and BHP Billiton Ltd., analysts said.
“Iron ore consumption will keep slowing to at least the first quarter, or even longer,” said Helen Lau, a Shanghai-based analyst from Daiwa Securities Group Inc. She said the stimulus plan may boost China’s iron ore imports to between 400 million and 450 million tons.
Brazil’s Vale and Rio Tinto, the world’s two largest iron ore suppliers, have announced production cuts because of reduced demand from China. Imports dropped 22 percent in October to 30.6 million tons from the previous month, according to China’s Customs General Administration.
Domestic iron ore mines that started in the past five years are losing money, and some have closed, Zou said. More may shutter as prices of the raw material continue to fall, he said.
Although this week’s stimulus plan is “positive,” it will be difficult to gauge how the market will be bolstered, Zou said.
Falling Prices
Cash prices of iron ore imported by China have tumbled 62 percent since May 9, according to Beijing Antaike Information Development, a research firm. Contract iron ore prices charged by Vale, Rio and BHP may fall 40 percent next year, UBS AG said.
Iron ore contract prices are negotiated on an annual basis. That may change pending discussions between the producers and steelmakers, Zou said. Price talks may be delayed because of the financial turmoil, Nippon Steel Corp., the world’s second-largest mill, said Nov. 7.
China will produce between 380 million and 390 millions of iron ore concentrate this year, up from 340 million tons a year ago, Zou said. Chinese ore tends to be of lower quality than those imported from Brazil and Australia, the world’s two largest exporters of the raw material.
Tags: imports, iron-ore, material, steel