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China Nov iron ore imports jump, steel output down
Published on: 2009-12-11
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BEIJING, Dec 11 (Reuters) - China's iron ore imports in November rebounded 12.3 percent from the previous month to reach 51.07 million tonnes, but steel output slumped over the period as the industry slowed for winter, official data showed on Friday.

Though crude steel output declined 8.7 percent to 47.26 million tonnes over the month, ore imports remained brisk, with mills seeking to replenish their declining inventories, traders suggested.

"Most mills like to have 40 days of stockpiles but heavy steel output means they now have around 20 days," said a Zhejiang-based trader.

Analysts said that despite the seasonal fall in steel demand, the increase in ore import volumes in November was not unexpected.

"We saw a sharp decline last time and we are now moving back to the average," said Su Aik Lim with Fitch Ratings in Beijing. 

Iron ore imports in October stood at 45.47 million tonnes, down almost 30 percent from the September record of 64.55 million tonnes, with traders wary about a possible decline in steel output in the final months of the year.

SUSTAINABLE GROWTH

The Chinese government has expressed concern that the high rate of iron ore imports this year has been caused by speculative activities among traders and steel enterprises, and it has threatened a crackdown.

The sector has been producing steel with abandon in the face of a global economic downturn, with output rising 12.1 percent to 581.177 million tonnes over the first eleven months. But the rise in imported iron ore has been even quicker, surging 38.4 percent to 565.86 million tonnes over the same period.

Part of that has been caused by lower spot market prices, which made it uneconomical to use domestic iron ore, but a price recovery in November pushed Chinese output to a new monthly record of 86.781 million tonnes.

Fitch's Lim said imports remain high but they are now at healthier levels, probably because idle domestic capacity has been put back in operation.

And the sector is unlikely to be too alarmed by the decline in crude steel output, which was still 37.4 percent higher than the November last year.

"The figures are not a surprise because we are used to seeing steel production slowing down in the winter months," said Lim.
 

The November figure translates into a daily output of 1.57 million tonnes, according to Reuters calculations, down 6 percent compared to October, but still slightly higher than the year-to-date average of 1.55 million tonnes.

The mills themselves remain convinced that domestic demand will hold strong and that a revival in export markets is just around the corner, and the evidence from Friday's trade data was positive but not conclusive, showing November steel product exports at 2.85 million tonnes, up 5.2 percent compared to October.

Exports from January to November reached 21.26 million tonnes, down 62.1 percent compared to last year. [ID:nTOE5BA036]

While convinced the sector still looks strong, traders have been worried about the government's efforts to curb overcapacity through a series of new measures aimed at closing undersized and "backward" steel smelters.

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