China’s Jan iron ore port stocks rise as restocking winds down ahead of holidays
China’s iron ore port inventories were up slightly from a week ago to about 125 million mt in the week of Jan. 17, CEIC data showed Jan. 26, as most steel mills relying on seaborne procurement nearly completed their restocking ahead of the Lunar New Year break.
With only half-a-month left before the Lunar New Year festival, port inventories of iron ore have accumulated as restocking activities of most mills gradually come to an end while several northern mills buying from ports are still in the process of replenishment.
S&P Global Platts 62% iron ore fines benchmark was assessed at an average of $170.38/mt CFR China during the week of Jan. 17-23, compared with an average $171.14/mt the week before.
The margins of steel mills shrunk due to increasing raw material costs versus a stagnant steel market. A northern rebar producer cited a margin loss of Yuan 200/mt ($31) recently.
Pellet and lump transactions have also turned sluggish due to high quotations, a source in Beijing said, adding that mainstream lump and pellet supply has reduced with lower import.
In general, mills will not easily adjust their burden mix, as to keep blast furnace operations stable unless there is long-term loss, however, some mills have already started showing interest in lower grade products to reduce costs, after considering falling margins and expensive prices for high grade iron ore.
“Some mills almost finished restocking and their target inventory days will be at 15-20 days in northern region. Mills might will make some changes of iron ore usage after [the] holiday if profits still in negative situation,” a Beijing trader said.
A Southern rebar producer said he has already finished restocking and has more than two months’ inventory in hand. The producer booked a Yuan 200/mt profit margin but he expects steel prices to drop further before the Lunar New Year break due to the accumulated stocks.
Nevertheless, MIIT plans to promote reducing steel output goal in the year 2021, and an industry source said this will inject some confidence in the steel market.