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Cliffs Natural Resources and China’s Steel Production

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Iron ore demand

The demand from China is the largest driver for the seaborne iron ore demand. China consumes more than two-thirds of seaborne-traded iron ore. China’s iron ore imports and the outlook for steel production are the main drivers of the future demand for iron ore.

Let’s have a look at China’s iron ore imports and steel production outlook.

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China’s iron ore imports

China’s iron ore (COMT) imports for June 2017 rose 15.0% YoY (year-over-year) to 94.4 million tons. That was expected since shipments of iron ore from Australia and Brazil rose in the previous month. Imports in the first half of 2017 totaled 539.0 million tons, a rise of 9.3% YoY.

China’s steel production outlook

China’s steel production is hitting one record after another. Its production for June 2017 came in at 73.2 million tons, which was a monthly record. Production for June was 5.4% higher YoY. June’s increase also marked the 16th consecutive monthly rise YoY. Chinese steel mills are producing higher volumes to take advantage of higher margins in the market.

Iron ore inventories at Chinese ports are also inching higher. According to Shanghai SteelHome, inventories were ~141.5 million tons for the week ended June 23, 2017.

All these factors could lead to lower iron ore imports from seaborne players such as BHP Billiton (BHP) (BBL), Vale (VALE), Rio Tinto (RIO), and Cliffs Natural Resources (CLF).

In the next part of this series, we’ll look at some other indicators of Chinese steel demand.

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