On the face of it, China’s record iron ore imports last month suggest the uptick in prices during the month wasn’t an aberration.
But even though December’s strong import figure of 96.27 million metric tons will boost 2015 iron ore imports to 953.36 mmt, nearly one billion, it masks an edifice that is crumbling before our very eyes.
China’s iron ore imports are so high in part because domestic miners have finally begun to respond to the current low price situation and shutter production. Port stocks have risen in line with imports. Inventories have been rising for six of the last seven weeks, according to Bloomberg to 93 mmt.
Chinese Steel Production
China is churning out steel in spite of a slowdown in domestic demand with its surplus powering rising exports. China’s steel exports rose by almost 20% in 2015 to a record 112.4 mmt. To put that in perspective that is enough to meet demand in Germany and Japan for a year and still leave almost 9 mmt to spare.
Such a level of exports is untenable in the medium term. Global demand is flat and trade tensions are rising. Exports will have to be reduced this year either voluntarily or by being shut out of mature markets by anti-dumping actions.
Beijing knows this and has been trying to encourage steel producers to close excess capacity via a range of means but largely under the umbrella of environmental considerations. Steel production is a major source of pollution in China and with the country producing more than it needs — both steel and pollution — there is a strong case for a more forceful approach in the months ahead.
SOurce:Metal Miner