Iron ore imports by China shrank in the first six months of the year, highlighting weakness in demand in the world's largest buyer as mills sold a record amount of production overseas amid a domestic glut.
Inbound cargoes of iron ore totalled 452.9 million metric tons between January and June, 0.9 per cent lower than the same period a year earlier, according to customs agency figures released on Monday. Overseas sales of steel products surged 28 per cent to 52.4 million tons in the six months, the agency said.
The stagnating trade in iron ore and simultaneous jump in steel-product exports show the extent of the slowdown in China's steel industry, which is grappling with a property slump, overcapacity and losses. Benchmark iron ore prices collapsed last week to the lowest level since at least 2009, while steel rebar sank to a multiyear low in China. Rio Tinto Group said on Monday that iron ore had declined to a so-called new-normal level, which may persist through to 2020.
"China's iron ore imports shrank in the first half, indicating that the country's steel consumption obviously peaked last year," Xu Xiangchun, chief analyst at Mysteel Research, said by phone from Beijing on Monday. "Mills won't be able to sustain losses at the current level and will gradually reduce production, and reduce their need for iron ore."
In June, iron ore imports were 74.96 million tons compared with 70.87 million tons in May, the agency said. Steel-product exports were 8.89 million tons in June from 9.2 million tons the month before, according to the agency.
While iron ore market conditions have changed, fundamentals remain robust, Michael Gollschewski, managing director of Rio's Pilbara mines, said in a presentation on Monday. The London- based company, Australia's largest shipper, declined to offer precise figures or define its "new normal" closely. Its shares in London traded 1 percent higher at 12.13pm local time.
Iron ore imports by China are expected to pick up this month and in August, Citigroup said in a report on Monday, citing increased shipments in June from Australia and Brazil, the world's two biggest suppliers of seaborne ore.
The latest gauge of China's slowdown will come on Wednesday, when official data on gross domestic product in the second quarter will be issued. The second-biggest economy expanded 6.8 per cent from a year earlier in the period, according to the median estimate of economists surveyed by Bloomberg. That compares with 7 per cent in the first quarter.
Iron ore with 62 per cent content delivered to Qingdao rose 0.4 per cent to $US50.30 a dry ton on Monday, according to Metal Bulletin Ltd. The price sank to $US44.59 on Wednesday, the lowest for data going back to May 2009. Spot rebar fell to 2102 yuan ($339) a ton on Thursday, the lowest level since at least 2003.
Baoshan Iron & Steel Co lowered its hot-rolled steel prices by 200 yuan a ton as of July 10, according to a company statement on Monday. That's the second reduction in a month by China's biggest publicly traded mill.
Prospects for an expanding glut and declining demand will worsen the outlook for Asia's steel industry, Moody's Investors Service said in a statement on Monday. Earnings of Chinese steelmakers will fall in the next 12 months as the real estate, infrastructure and manufacturing sectors weaken, Moody's said.