Not surprisingly, any discussion of iron ore prices in top consumer China inevitably involves some reference to import stock inventory.
So when Reuters reports that the Dalian commodity exchange May iron ore contract price touched a low of 475.50 yuan per ton this week and China’s Qingdao port price dropped below $70 per ton — the lowest since Dec. 11 — analysts readily refer to record port stocks as being the cause.
Port inventory stood at 158.6 million tons at the end of last week, closer to the previous week’s record of 159.1 million times, according to a separate Reuters article. The article goes on to explain why headline port stocks are far from the whole story. China’s environmental crackdown on polluting industries this winter has driven steel mills to favor high-purity minimum 62% iron ore grades, supplied by firms like Australia’s Rio Tinto and BHP Billiton, Brazil’s Vale, and South Africa’s Kumba, over lower 58% Fe grades, such as Australia’s Fortescue Metals group and some Indian suppliers.
Much of the rise in import stocks has been a buildup of low-grade iron ore shunned by steel mills keen to avoid the pre-blast furnace upgrading needed for lower grades or the increased consumption of polluting coking coal that the protracted smelting of lower grades requires.