Iron ore imports by China contracted in May from April and the same month a year earlier, highlighting weakening demand in the largest buyer as policy makers seek to shift the economy away from investment-led growth.
Cargoes fell 12 percent from April to 70.87 million metric tons, and were 8.4 percent lower than a year earlier, according to customs data on Monday. That’s the lowest monthly total since February. Adjusted for the number of days in the month, the imports in May were at the slowest pace since November.
“With China’s crude-steel output declining, that’s going to reduce demand for iron ore,” Wu Zhili, an analyst at Shenhua Futures Co. in Shenzhen, said by phone on Monday. “Imports will continue to grow at a slower pace this year.”
While iron ore prices posted the biggest monthly advance in almost two years in May as China’s port stockpiles fell by a record, Goldman Sachs Group Inc. is among banks predicting that the rally won’t last as global supplies are set to expand further. In many commodity markets, recently installed low-cost supply can now be stretched to meet demand, BHP Billiton Ltd. Chief Executive Officer Andrew Mackenzie said last week.
“Steel mills probably decided to hold off imports as prices rebounded, and use ports inventories instead,” Wu said.
Over the first five months, iron ore purchases were about 378 million tons, down about 1.1 percent from the same period in 2014, according to the data. China buys supplies from abroad to supplement locally mined production.
Year-to-Date Drop
Ore with 62 percent content delivered to Qingdao fell 0.5 percent to $64.45 a dry ton on Friday, according to Metal Bulletin Ltd. Prices jumped 10 percent in May following a 9.4 percent gain in April. After bottoming on April 2 at a decade-low $47.08, prices trimmed this year’s loss to 9.6 percent.
Lower prices are creating a testing environment for commodity producers, while demand is slowing to more routine levels amid the transition in China’s economy, Mackenzie said Wednesday. BHP is the world’s biggest mining company and largest iron ore producer after Rio Tinto Group and Vale SA.
Holdings at ports fell 13 percent to 85.4 million tons last month, and extended the decline in the first week of June to 83.8 million tons, according to Shanghai Steelhome Information Technology Co. That’s the lowest level since November 2013.
Source: Bloomberg
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