BEIJING: Iron ore stockpiles at China’s ports will probably surge above 100 million metric tons within weeks as low-cost supplies rise and steel mills rein in output over a nationwide, week-long holiday, according to China Merchants Futures Co.
“The increase will be driven by higher shipments from Australia and Brazil, especially in the final months of 2015, against a seasonally weak period for China demand,” Zhao Chaoyue, an analyst at China Merchants Futures, said by phone on Monday. Zhao predicted the target may be breached before the Lunar New Year break, which starts Feb. 8.
The inventories rose 1.7 percent to 94.55 million tons last week, an eight-month high, according to data from Shanghai Steelhome Information Technology Co. Holdings — which have expanded for the past four months to climb above their five-year average of 92.7 million tons — last topped the 100 million ton mark in March.
Rising port holdings in the top user may hurt the outlook for prices, which have been pummeled over the past year as supplies from exporters including Rio Tinto Group and BHP Billiton Ltd. in Australia and Brazil’s Vale SA expanded while China’s steel output and demand fell. Citigroup Inc., which last week raised the possibility that iron ore may sink into the $20s a ton, has also forecast an increase in the stockpiles to above 100 million tons in the first half, before they taper lower toward the end of 2016.
“I don’t think there’s an appetite for people to hold that much inventory on a sustainable basis,” Szpakowski said in a Jan. 14 interview. “I don’t think traders or steel mills want to hold that much inventory, especially if demand is weak and prices are weak.”
Mills in China typically join other industries in scaling back output over the Lunar New Year break as construction slows and workers take time off. After the holiday, more mills will resume operations, lifting demand for ore and cutting the port holdings, according to China Merchants’s Zhao.
Imports of iron ore by China increased 17 percent to a record 96.27 million tons last month, according to customs data. The same month, miners in Brazil shipped 39.5 million tons, an all-time high and 41 percent more than in November, government figures show.
Ore with 62 percent content delivered to Qingdao advanced 2.2 percent to $41.12 a dry ton on Friday, paring a second weekly drop, according to Metal Bulletin Ltd. The commodity sank to $38.30 on Dec. 11, a record in daily prices dating back to May 2009.
