China’s iron ore imports dipped in August, contributing to a $10 a tonne drop over the past month in seaborne prices for the key ingredient in steel to the lowest level since October 2009.
Reduced imports of iron ore and coal, plus lower prices for other bulk commodities, helped push China’s August import data into negative territory.
China’s total imports shrank 2.4 per cent last month, while a 9.4 per cent growth in exports reflected strong demand from the US and Europe.
Weak Chinese manufacturing data for August have raised expectations for further domestic stimulus measures, following gradual easing of local housing policies. A slowdown in construction combined with overcapacity has helped pressure markets for steel and other metals.
China imported 74.9m tonnes of iron ore in August – down 9 per cent from July and roughly equivalent to June – as steel mills cut operating rates to their lowest level since March.
However, iron ore imports are still up nearly 17 per cent for the year to date, illustrating how falling prices have helped imported ore maintain market share at the expense of more expensive domestic iron ore mines.
In spite of the drop in prices, an official at the central planning agency, the National Development and Reform Commission, lectured BHP Billiton’s China head on the need for a “new model” in pricing, according to a transcript of the meeting last week released by the agency.
Her remarks raised concern that international iron ore miners could join the ranks of foreign industries targeted for “monopoly” pricing practices.
The China Iron and Steel Association was quick to downplay the NDRC comments, and state media did not report them, indicating that the Chinese steel industry does not support any move against their cheapest and highest-quality suppliers.
China’s largest steel mills are relatively free to set the terms of their import contracts after the collapse of the annual pricing system a few years ago.
Meanwhile, coal imports dropped 5 per cent in the first eight months of the year, in spite of lower international prices, thanks to new Chinese coal mines and hydropower dams amid a broader drop in demand for coal from heavy industry.
Copper imports have stabilised after a drop earlier in the summer due to a financing scandal in the northeastern port city of Qingdao, which caused banks to ratchet back funding for importers.
Overall in the year to date, China’s copper imports are up 18 per cent – a strong showing that many suspect reflects the use of imports of the red metal as a legal way to circumvent the country’s currency controls, rather than fundamental demand.
Crude oil imports are up 8 per cent during the year, but imports of oil products have fallen as local refineries are now able to meet domestic Chinese demand.
Source: FT
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