China mills' iron ore use rises, stocks drop

Daily consumption of imported iron ore sintering fines among the 64 Chinese steelmakers Mysteel samples regularly increased by 11,900 tonnes/day on week to reach 530,100 t/d on average over October 27-November 2, the latest survey showed. Market sources attributed the lift in usage to steelmakers in North China's Hebei and East China's Shandong resuming production.

"Steel mills in Hebei had reined in their output last week under the local government directive aimed at improving air quality," a market watcher based in Shanghai said. "After the restriction was lifted on October 31, local steel mills began ramping up production," he explained.

As a result, surveyed mills in Hebei's Handan and Xingtai areas saw their sintering fines usage rise by 5,800 t/d on week to average 120,100 t/d by November 2, while the daily consumption by mills in Tangshan remained largely stable at 144,100 t/d, according to Mysteel's data.

In the meantime, steelmakers in Shandong cranked up their output after resuming sintering operations, which in turn caused their consumption of sintering fines to increase by 6,000 t/d on week to 77,900 t/d by November 2, Mysteel's data showed.

Steel mills in other areas basically kept their iron ore usage stable during the survey period, the analyst in Shanghai noted.

Chinese steel mills were also tending to replace domestic iron ore with imported ores in their furnaces as the steady slide in prices had made imported iron ore more cost effective, Mysteel Global learned.

Mysteel SEADEX 62% Australian Fines, for example, had dropped below $80/dmt to hit a near three-year low of $79.4/dmt as of October 31.

However, the mills continued losing money as domestic steel demand remained lacklustre, making them increasingly cautious about procuring raw materials, the market watcher pointed out. Under these circumstances, steelmakers kept low inventories of iron ore.

Consequently, total stocks of imported sintering fines at the 64 sampled mills across China dropped by 295,500 tonnes on week to 11.2 million tonnes as of November 2, according to Mysteel's survey.

The existing stocks at mills will be sufficient for 19 days of consumption, unchanged from that in the previous week and still hovering around the lowest since 2011, under Mysteel's assessment.

Written by Anthea Shi, shihui@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.