China: Iron ore imports up 7% m-o-m in May amid rise in procurement from Australia

China, the world's largest iron ore consumer and importer, recorded imports of iron ore (excluding pellets) at 90.97 million tonnes (mnt) in May 2022 as against 84.78 mnt seen in April, according to the General Administration of Customs. Imports increased by 7% m-o-m due to increased procurements from Australia.

Australia largest exporter: Imports from Australia increased 12% m-o-m to 63.9 mnt as compared to 56.93 mn t in April. This is because the cyclone season has ended, and production at some mines has continued to increase. Also miners Rio Tinto and BHP increased their daily shipment volumes in May.

Meanwhile, imports from Brazil fell 7% m-o-m to 15.69 mnt. This could be due to lower Brazilian shipment volumes during the monsoon season in March. Brazilian imports to China are expected to rebound from June.

Iron ore imports from India: Imports from India rose 68% on the month to a nine-month high of 2.34 mnt as Chinese buyers preferred low-grade materials due to cost advantages amid thin steel margins.

Despite the strong demand for low-grade products, the increase in Indian imports was expected to be transitory, as imports from June are expected to fall sharply due to tax hikes imposed by the Indian government from May 2022.

Outlook- China iron ore imports are expected to rise further in June as Brazil recovers from the effects of the weather and Australian miners try to ship more volumes out before the end of their fiscal year. Chinese demand, on the other hand, was weak as the rainy season impacted steel demand, and Chinese mills began to shut down blast furnaces due to negative operating margins. Prices are expected to face additional headwinds in the coming weeks.

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