China iron ore demand weak on low steel margins

Posted on 23 November 2021

Many Chinese steelmakers signalled reduced demand for iron ore over the November 15-19 week, mostly because they had either constrained their production or were unwilling to ramp up production after their finished steel margins declined further.

 

By November 19, the domestic HRB400E 20mm dia rebar price under Mysteel's assessment had fallen to Yuan 4,716/tonne ($738/t) including the 13% VAT, the item's lowest since March 11, or down another Yuan 123/dmt on week.

"Over the past week, more mills in East China observed maintenance stoppages after they started losing money, and this dampened their iron ore demand," a Shanghai-based iron ore trader commented.

In North China's Hebei province, some steel mills whose operations were dangerously close to break-even also lacked the eagerness to lift their production. "As a result, their iron ore procurement tended to be frequent but small-scale. And lower Fe grade iron ore products were more preferred by some mills," a Tangshan-based market watcher commented.

Mysteel's data showed the trend, with the blast furnace capacity utilization rate among the 247 Chinese steel mills regularly sampled plunging to 75.35% over November 12-18, or a new low since late March 2018. And among these steelmakers, only 42.86% were making profits, 6.93 percentage points lower on week.

On the other hand, the sluggish demand saw iron ore stocks at Chinese ports continue to accumulate, with the total inventories of imported ore at the 45 major ports under Mysteel's survey swelling by the eighth week by another 1 million tonnes on week to 151.1 million tonnes by November 19, or a new high since mid-August 2018.

Consequently, the oversupply in the iron ore market led prices of imported ore to remain under pressure during the past week.

On November 18, Mysteel SEADEX 62% Australian Fines slid to $86.85/dmt CFR Qingdao, the price's lowest since May 7 2020. Last Friday the index recovered to $91.75/dmt however, or $2.5/dmt higher on week after five weeks of declines.

Mysteel PORTDEX 62% Australian Fines in Qingdao followed a similar trend, slumping to Yuan 577/wmt FOT and including the VAT on November 18, or the lowest since January 25 2019. It recovered to Yuan 587/wmt on November 19, but was still Yuan 33/wmt lower on week.

Source : Mysteel Global