China’s iron ore imports have slumped 13 per cent to their lowest level in six months, as stockpiles at ports across the mainland remain at record levels.
Trade figures released by China’s Customs Bureau on Monday showed imports during April falling to 82.23 million tonnes, in a further sign that the rally in hard commodities seen over the last year is falling away.
Iron ore imports in April were down 2.3 per cent compared with the same time last year.
The iron ore price is hovering just above $US60 a tonne, down from nearly $US100 a tonne towards the end of last year as China’s factory output slows and Beijing tightens restrictions on the housing market.
Despite worsening conditions across the mainland, Chinese steel makers continue to pump out record volumes, raising fears of a steel glut that will require big production cuts later in the year.
Chinese steel production grew by 4.6 per cent to 201.1 million over the first quarter of this year, including recording average daily production during March.
At the same time, China’s port stocks of iron ore hit a record 135 million tonnes last week, according to official figures.
Prior to the recent run up in inventory, the highest stockpile seen was just over 100 million tonnes in late 2013, while this figure stood at just 80 million tonnes in June last year.
A small portion of the ever-growing stockpile has been attributed to mills holding off purchases, due to expected production cuts ahead of a major conference in Beijing over the weekend. China’s leaders typically like blue skies for major events in the capital and therefore often shut down factories.
Xu Xiangchun, the chief information officer of MySteel, said the lower iron ore import figures in April were partly due to weather disruptions in Australia during March.
“I think we will see imports back above 90 million tonnes over the next couple of months,” he said.
Australia provides around 65 per cent of China’s imported iron ore.
And while Australian producers have continued to steal market share from smaller rivals, recent data points to further weakness in the iron ore price over the coming months.
A key indicator of manufacturing activity in China, the Purchasing Managers Index, softened to 51.2 points in April as new orders fell away and the outlook worsened.
ANZ said the weakness in the PMI indicated that economic growth was likely to moderate in the second quarter, after a stronger-than-expected reading of 6.9 per cent during the first three months of the year.
China’s overall trade performance in April was slightly worse than expected.
Exports grew by 8 per cent from a year earlier, half the pace recorded in March, according to official figures.
Imports rose by a slower-than-expected 11.9 per cent, mirroring the softness in commodity prices over recent months.
“Commodity prices, China‘s iron ore inventory pile-up and credit tightening may weigh on China’s import outlook in the near term,” said ANZ’s Betty Wang in a note to clients.
“China’s iron ore inventory appears to have peaked of late, which is likely to affect the country’s commodity imports in the near term.”
By Angus Grigg