China's iron ore demand to remain weak in Sept - Mysteel

Chinese demand for iron ore will likely remain weak this month and put prices under some pressure, according to Mysteel's latest monthly report released on September 2.

Newly added steel capacity this month will provide only limited lift to domestic steel output, the report noted, while many mills nationwide may have to trim their production further to comply with the central government's directive regarding lower national steel output.

Normally, steel demand and production recover in September and so boost iron ore demand, but because of the cutbacks, pig iron output may fall further this month and so depress iron ore demand accordingly, the report explained.

Last month, lower production among many steelmakers led daily molten iron output to decline to an average of 2.27 million tonnes/day over August 20-26, down 40,800 t/d from the volume during the corresponding week in July and 248,800 t/d lower on year. It was also the second lowest weekly average this year.

Mysteel also expects that such sluggishness will offset any temporary improvement in demand from mills stocking additional ore quantities for production during the upcoming three-day Mid-Autumn Festival holiday over September 19-21 and the Seven-day National Day holiday over October 1-7.

Mysteel data for iron ore shipments show that China's 45 ports received around 98.6 million tonnes of ore over August 2-29, up by 12.47 million tonnes or 14.5% from the volume over the previous four weeks.

Regarding ore supplies this month, the numbers of iron ore vessels arriving at Chinese ports are expected to decline from August due to the fluctuation in overseas ore supply last month. On the other hand, the tonnage stocked at ports may continue to increase, as the new arrivals in August increased markedly and the congestion at Chinese ports continues with many vessels are still waiting to berth.

By August 26, the number of vessels queuing at the 45 sampled ports had slipped by three on week to 182, still a rather high level, though better than the 199 vessels over August 6-12, the longest queue since January 29, according to the survey.

The serious congestion of vessels, especially at East China ports, occurred partly because of delays in Customs clearance of foreign vessels while stringent testing for COVID-19 among vessel crews, port employees and truck drivers continues in response to the virus's resurgence in Jiangsu province in July. Also, adverse weather in August such as strong winds and heavy rain temporarily affected port operations.

Nevertheless, the port congestion will ease further in September, causing inventories of imported iron ore at the 45 major Chinese ports under Mysteel's regular surveys to grow. As of August 26, these had swollen to 129.2 million tonnes or up 1.07 million tonnes from the volume as of July 29.

Last month saw iron ore prices slump further amid the softening ore demand, with Mysteel SEADEX 62% Australian Fines down to as low as $129.25/dmt CFR Qingdao as of August 19, a near nine-month low. By August 31, the index had recovered to $151.55/wmt but was still $28.7/dmt lower on month.

Written by Victoria Zou, zyongjia@mysteel.com

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