Chinese mills' iron ore use drops, stocks mount

Over May 19-25, the daily consumption of imported iron ore sintering fines among the 64 Chinese steel mills under Mysteel's survey eased to 544,000 tonnes/day - a low since April 8, marking the third straight week dip by another 8,900 t/d or 1.6%. And stocks of these fines at the sampled steelmakers grew further during the period, the latest survey findings show.

In particular, steelmakers in North China posted the steepest decline in their iron ore use. For example, for those in Handan and Xingtai in North China's Hebei province, their daily usage of imported fines dropped by 10,400 t/d or 8.1% on week to 118,500 t/d as of May 25.

During the latest survey period, city governments in Hebei such as Handan, Xingtai, Tangshan and Wu'an imposed temporary restrictions on local steel mills' sintering machines during the environmental checks, according to a Shanghai-based analyst.

"Some mills in Tangshan were required to suspend their sintering machines over May 20-23. Meanwhile, we also noticed that some steel producers in North, Northeast and Southwest China had started cutting their production and conducting maintenance on their blast furnaces after suffering large losses from steelmaking," she said.

As of May 25, the gross profit on billet sales among integrated mills in Tangshan, China's top steel hub and billet supply base, was at an average loss of Yuan 102/tonne ($15.2/t), according to Mysteel's data.

Partly due to their lower usage of ore, stocks of iron ore sintering fines held by the 64 surveyed mills rose to around 16 million tonnes as of May 25, up for the third week though by a small 50,400 tonnes or 0.3% on week. The existing stocks of imported iron ore sintering fines at these mills, therefore, will be sufficient for 26 days of use, the same as the prior week.

The slight increment in mills' iron ore stocks was also a result of their recent low buying interest for ore, given the meagre or even negative profits they'd earn on selling finished steel, according to the analyst.

Written by Lea Li, liye@mysteel.com

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