Customs data and China’s iron ore imports
China consumes more than 70% of the seaborne-traded iron ore. Therefore, to gauge the direction for future iron ore prices, it’s important to look at Chinese iron ore imports.
China’s iron ore imports have remained very strong almost throughout 2017. In December 2017, imports fell 11% year-over-year (or YoY) to 84.3 million tons. For 2017 as a whole, imports showed growth of 5% to 1.075 billion tons. This growth also represented a record-high imports figure for the country.
- Firstly, strong domestic steel prices have encouraged mills to produce more.
- Secondly, the switch to quality iron ore to curb pollution has increased the appetite for imported ore versus the domestic one.
Strong iron ore import demand
Capacity cuts in China are leading to higher steel prices. Steel mills have probably restocked in anticipation of higher demand as capacity cuts end in March. Most market participants believe pent-up demand should emerge after March, which should be conducive to iron ore prices.
Even now, miners (XME) producing high-grade ore such as BHP (BHP), Rio Tinto (RIO), and Vale (VALE) are paid a premium over other miners. Miners such as Cleveland-Cliffs (CLF) and Fortescue Metals Group (FSUGY) could keep attracting discounts.