MYSTEEL: Feb to see China iron ore fundamentals weaken
Chinese imported iron ore supplies will ease modestly this month, the report forecasted, as shipments from major iron ore miners in both Australia and Brazil have been reducing after achieving their respective shipments target for 2021.
For example, over January 31-February 6, the total volumes of iron ore shipped to global destinations from the 19 ports and 16 mining companies in Australia and Brazil decreased to 21.2 million tonnes - the lowest level since April 9 2021, or down for the third week by another 331,000 tonnes or 1.5% on week, according to Mysteel's data.
Hence, iron ore arrivals to major Chinese ports will ease on month in February, due to the previous relatively low shipments, according to Mysteel's report.
Over January 31-February 6, Mysteel's shipments survey showed that iron ore new arrivals at the 45 Chinese ports dropped by 2.3 million tonnes or 9.3% on week to 21.8 million tonnes.
As for China's domestic iron ore supply, this month may see overall production decline to a low level in recent months, as the distribution and use of explosives had been banned at iron ore miners in some regions due to the Winter Olympic Games being held in and around Beijing over February 4-20, Mysteel's report noted.
For example, some mining companies in Liaoning in Northeast China had been ordered by the local governments to suspend their use of explosives over January 28-February 20, according to a Shanghai-based analyst.
Meanwhile, many other miners, especially those in North and Northeast China, halted their production during the Chinese New Year holiday (CNY) over January 31-February 6 when most workers had returned to their hometown for holidays, she added.
On the other hand, iron ore demand from Chinese steelmakers may ease in the near term, mainly due to the tough production restrictions imposed on them to reduce air pollution during the Winter Olympics, according to the report.
For example, steel producers in North China's Hebei province had been required to further scale down their operations of blast furnaces and sintering machines since the end of January, as reported.
With other neighboring areas of Beijing introducing stringent production curbs, Mysteel's latest report forecasted that daily molten iron ore output at the surveyed 247 Chinese steel mills may drop to an average of 2.11 million tonnes/day this month.
Over January 21-27, daily molten iron output at these 247 mills had increased to an average of 2.19 million t/d - a high since September 24 2021, suggesting the steady operation resumption on blast furnaces among steelmakers in North and East China, according to Mysteel's survey.
Furthermore, most mills will most likely slow down their iron ore buying and will consume their in-plant stocks, in response to their shrinking margins, Mysteel's report predicted.
Although China's iron ore market fundamentals are expected to weaken this month, the oversupply may remain, which will then drag iron ore prices down should the demand recovery is less than expected due to the ongoing production curbs among domestic steelmakers, the report noted.
Last month, steelmakers' firm replenishment demand before the CNY holiday saw Chinese imported iron ore prices grow steadily, with Mysteel SEADEX 62% Australian Fines increasing by $18.25/dmt CFR Qingdao on month to $137.9/dmt as of January 31.
Written by Lea Li, liye@mysteel.com
Edited by Zhenqi Yang, yangzhenqi@mysteel.com
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