China’s Iron Ore Imports May Fall for Second Year, Mysteel Says

Iron ore imports by China, the world’s biggest buyer, may fall for a second year in 2011 even as January purchases surged, as record prices spur output from domestic mines, according to Mysteel Research Institute.

The price of 62 percent-iron ore arriving at China’s Tianjin port rose to $190.60 a ton yesterday, the highest level since the data became available in November 2008, according to The Steel Index. China’s imports may fall “marginally” this year after dropping 1.4 percent in 2010, Xu Xiangchun, chief analyst with Mysteel, said by phone from Beijing.

“I am more inclined to say that imports may fall if prices stay above $180 because Chinese mines are very active in production,” Xu said.

Iron ore imports fell last year for the first time since 1998 to 618.6 million tons because China took measures to rein in property speculations and as domestic mines increased output. Imports rose 48 percent to a record last month due to recovering steel production and restocking amid expectation prices may rise.

Lower imports and higher iron output last year indicated that Chinese steelmakers consumed 70 million metric tons more of iron ore from domestic mines in 2010 than in 2009, Xu said.

China invested 330 billion yuan ($51 billion) in domestic iron ore mines in the past five years and may achieve more than 100 million tons a year of concentrate production, with some of the new capacity coming online this and next year, Xu said. China may invest another 100 billion yuan this year, he said.

“We will see the imports post a big drop at some point. We are hearing the record prices have impeded some buying interests,” he said.

Low Growth

China’s steel production may rise 5 percent to 660 million metric tons this year, the Ministry of Industry and Information Technology said today in a statement. Output gained 9.3 percent in 2010 after rising 14 percent in 2009.

The nation’s steel industry, the world’s biggest, has “entered an era of low growth” amid slowing capacity expansion and higher production costs, China International Capital Corp. analyst Luo Wei said Dec. 15.

Cash steel prices in China fell 0.3 percent today, the first drop this year, from a more-than-two-year high of 4,961 yuan on Feb. 15, according to the Beijing Antaike Information Development Co. A price correction may occur as soon as March because private steelmakers have been running at full capacity, leading to higher stockpiles, Mirae Asset Securities Ltd. analyst Henry Liu said in a note yesterday.

Xu’s forecast is echoed by the industry ministry, which said China may keep iron ore imports at about 600 million tons this year, indicating a projected 3 percent drop.

--Helen Yuan. Editors: Alan Soughley, Indranil Ghosh

To contact the Bloomberg News staff on this story Helen Yuan in Shanghai athyuan@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net.