According to Mysteel’s survey among 700 mining companies, they will be able to increase their production by another 11.5 million tonnes for the second half of 2019, after having supplied to the Chinese market with nearly 20 million tonnes over January-June.
“China’s domestic miners may maintain their output at the present level for the rest of the year as the current prices guarantee quite nice profits, and our in-house inventories have been running low this year because sales have been good so far,” an official from a mining company in Shandong of East China, warning, though, “production will definitely decrease if the price falls back to last year’s level.”
The transaction price for 65% Fe content concentrates in Zibo of Shandong was assessed at Yuan 1,025/dmt ($145.6/dmt) EXW and including 13% VAT as of June 28, an over five-year high or up Yuan 270/dmt or 35.8% from the start of 2019, according to Mysteel’s database.
A Shanghai-based iron ore analyst agreed, noting that Mysteel’s estimation is higher than the 10-20 million tonnes that market sources had projected in early 2019.
“All are in theory, and the key element is price, when the price is good enough, some idled mines will resume operations and vice versa,” he said.
China’s domestic iron ore demand has been robust since the beginning of this year, as it has been rather competitive in pricing against imported iron ore, both in terms of delivery to the steel mills and including the 13% VAT, an official from a beneficiation plant in Shandong said.
The plant has been primarily selling its concentrates to steel mills in North China’s Shanxi province, as the steel producers, being far from ports, find it more cost effective to transport iron ore from domestic miners than from ports, he added.
Recent domestic iron ore price declines following the plunges in seaborne iron ore prices, however, has thrown doubt on the possibility of more domestic iron ore supplies for the rest of the year, Mysteel Global noted.
As of August 15, Mysteel’s 62% Australian iron ore fines pricing index plunged by $24.3/dmt or 21.5% during the same period to $88.55/dmt CFR Qingdao.
The procurement price by steel mills for 64% grade concentrates in East China’s Anhui province fell to Yuan 855/dmt EXW and including 13% VAT, down Yuan 155/dmt or 15.3% during the same period, or the steepest decline among China’s major iron ore production regions, though it was still a three-month high.
Written by Zhiyao Li, firstname.lastname@example.org
Edited by Hongmei Li, email@example.com