China imported 82.52 million tonnes of iron ore in July, up 10.7 percent from the previous month, with buyers continuing to take advantage of lower prices despite weak domestic steel demand.
The total shipments represented the third highest on record, with steel mills in China continuing to produce at high rates despite weaknesses in the steel market. Margins for steel mills have also improved as a result of lower iron ore and other input prices.
"The import numbers are generally pretty volatile and you get up months and down months - the June number looked a little low so July represents a higher number, but if you look at the averages over the quarter, it is pretty much in line," said Graeme Train, analyst with Macquarie in Shanghai.
Prices over July were relatively steady, remaining within a range of $93.60-$98.00 per tonne and ending the month at $95.60, up 1.9 percent from the end of June, with spot market activity relatively weak, according to data from The Steel Index .IO62-CNI=SI.
"Limited demand and weak sentiment, coupled with the usual summer lull as many key players disappeared on holiday, led to a marked decline in spot market activity in July," The Steel Index said in a note on Thursday.
In a report published on Thursday, the China Iron and Steel Association (CISA) said that iron ore oversupply widened in July, adding that it expected prices to continue to edge downwards in coming months.
The surge in supply and the decline in prices has been good news for Australian producers, which have steadily increased their share of China's total imports.
Shipments to China from Port Hedland, Australia's main iron ore port, rose 4.8 percent on the month to a record high 30.57 million tonnes in July, suggesting that Australia's share of China's total imports increased further.
"We still haven't exceeded the January (export) peak yet, and the strength in shipments from Australia is knocking out just as many tonnes from high-cost producers in the global market as it is from high-cost domestic producers," said Train.
According to preliminary estimates by industry consultancy Custeel, average daily steel output in China fell 2.2 percent over the July 21-31 period, suggesting that producers were finally responding to weaknesses in demand.
With output starting to decline slightly and imports still at a relatively high level, an iron ore supply glut could worsen, with imported ore stockpiles at major ports set to rise further in coming months.
While port inventories fell for two consecutive weeks to reach 111.95 million tonnes by August 1, they remain 46 percent higher than at the same time last year, according to data from SteelHome SH-TOT-IRONINV.
Source: Reuters
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