China’s iron ore imports fall in May
In May, China’s iron ore imports came in at 70.9 million tons. This is a big drop compared to 80.2 million tons in April. Imports year-over-year were also lower by 8.4%. China’s steel exports surged in May with a month-over-month increase of 8%.
Iron ore imports in the first five months of 2015 were 378.2 million tons, 1.2% lower than the same period last year. The lack of any pickup in the underlying demand for steel is weighing on the Chinese demand for iron ore.
Customs data and China’s iron ore imports
Chinese customs data track the country’s iron ore imports. This is important for investors because the data give a good sense of the appetite for imported ore among Chinese mills and traders. China consumes about two-thirds of seaborne iron ore.
China’s import appetite in turn impacts iron ore players involved in the seaborne iron ore trade. These include Cliffs Natural Resources (CLF), Vale SA (VALE), and Rio Tinto (RIO). The iShares MSCI Global Metals & Mining Producers ETF (PICK) invests in iron ore, so the data affect it equally. BPH Billiton (BHP) (BLT) is PICK’s top holding, making up 16.7% of the fund. The SPDR S&P Metals & Mining ETF (XME) also invests in some of these stocks.
Demand remains subdued
Demand fundamentals for steel remain subdued in China, which leads to weaker iron ore imports. This is despite various easing efforts undertaken by the Chinese government.
Apart from exports and imports, inventories at ports, especially in China, help determine the ongoing consumption of iron ore by steel mills. We’ll discuss China’s iron ore port inventories in the next part of this series.