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China’s Iron Ore Inventory Rises to Record on Output, Financing

Iron ore stockpiles in China, the world’s biggest buyer, surged to the highest ever amid demand to use the steel-making ingredient as collateral to get credit and as mills ramped up production in a peak season.

Inventories at ports rose 1.4 percent to 109.55 million metric tons in the week ended April 25 from a week earlier, according to data tracked by Shanghai Steelhome Information Technology Co. Stockpiles climbed 25 percent this year.

Spot ore prices in China declined 17 percent this year as inventory climbed amid slowing economic growth in the world’s biggest producer of steel. Iron ore is among the commodities used in the so-called financing deals in the country, in which they are used as collateral for traders or companies to get funding for other businesses.

“We remained bearish on iron ore’s long-term outlook given the high supply although we rule out an imminent collapse in prices as a port inventory increase coincides with a steel output expansion,” said Gao Bo, chief iron ore analyst at Mysteel.com, a researcher in Shanghai.

Crude steel output reached 202.7 million tons in the first quarter, up from 191.9 million tons a year earlier, according to the National Bureau of Statistics.

Iron ore shipments into China, which accounts for more than 60 percent of the seaborne trade, were a record 820 million tons last year, according to China Iron & Steel Association estimate. Imports rose 19 percent to about 222 million tons in the first quarter, customs said on April 10.

Ore with 62 percent content delivered to the Chinese port of Tianjin dropped 1.9 percent to $111 per dry ton on April 25. Futures for September delivery on the Dalian Commodity Exchange declined 3.3 percent to 769 yuan per ton by 11:11 a.m. Shanghai time.
Source: Bloomberg