China's Iron Ore Stockpiles Gain at Ports as Demand Increase

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Wednesday, 11 February 2009

Stockpiles of iron ore at major ports in China, the world’s largest buyer of the steelmaking material, have gained 7 percent since the end of the Lunar New Year holiday as mills boost imports. Inventories rose to 61 million metric tons at the end of Feb. 6, from 57 million tons at the week ended Jan. 23, Hu Kai, a Shanghai-based analyst with Umetal Research Center, said today. The holiday ended Jan. 30. Stockpiles are still down from the record 74 million tons reached in November.
Rising iron ore demand may strengthen the bargaining position of producers BHP Billiton Ltd., Rio Tinto Group and Cia. Vale do Rio Doce in price talks with Chinese steelmakers. Chinese mills, which cut output in the last quarter, are starting to benefit from the government’s 4 trillion yuan ($585 billion) stimulus plan.
“Mills in China’s northern province of Hebei are ramping up production because they have returned to profit, increasing the need for ore,” said Du Wei, head of iron ore research at Umetal. “Ore stockpiles at the plants are very low.”
The inventory gains are mainly in northern ports such as Jingtang and Caofeidian in Hebei, the nation’s biggest steelmaking province, Umetal said. Caofeidian, which holds about 5.6 million tons of stocks, has 20 ships queuing up to unload, Du said.
Chinese prices of hot-rolled coil, an industry benchmark, have gained 40 percent to 4,000 yuan a ton from November, when the government first announced its stimulus package. China plans to build infrastructure projects, including railways and airports, likely increasing demand for steel and metals.
The contract price for Brazilian iron-ore fines may be unchanged or fall no more than 9 percent, while Australian fines may drop 20 percent because of better-than-expected Chinese demand, Credit Suisse Group AG analyst Roger Downey said in a note to clients yesterday. The market had expected a decline of 30 percent to 40 percent, Downey said on Feb. 4.
Source: Bloomberg