China’s iron ore port inventory
The SteelHome China Steel Price Index collects inventory data on a weekly basis from 44 ports in China (FXI). Lately, inventories have not been moving significantly, but they have been on the lower end.
China’s iron ore port inventory for the week ended April 24 were 97.65 million tons as compared to 98.15 million tons a week earlier. This means that the inventory was 1.40 times higher than the amount of steel produced in March. Often preferred over raw inventory figures, this ratio measures how much inventory is available in order to keep current steel production activity going. The five-year average ratio is 1.49 times the steel production figures.
Inventory has come down in recent weeks. This should be favorable for iron ore companies if the underlying demand in the market picks up as well. The impacted companies are mainly the ones involved in seaborne trade:
The iShares MSCI Global Metals & Mining Producers ETF (PICK) have holdings in Rio Tinto, BHP Billiton, and Vale. Together, these companies make up 31.4% of PICK’s holdings. The SPDR S&P Metals & Mining ETF (XME) also invests in metals and mining companies.
Importance of China’s iron ore port inventory
China’s iron ore port inventory is a key indicator that reflects the supply and demand balance. When steel mills continually demand iron ore, inventory doesn’t build up at the port. However, if mills don’t use up the shipments that are coming through seaborne routes, inventory piles up, indicating a weaker final demand.