Iron ore stocks in China hit new low

Iron ore concentrate inventories at 186 selected Chinese mining companies fell to 1.6 million tonnes as of February 4, hitting a new low since Mysteel began researching reserves in January 2019. Declining production among mining companies and strong sales to steel mills resulted in a decline, according to the latest release from Mysteel.

The results showed that during the study period from 22 January to 4 February, in-plant concentrate stocks of surveyed miners decreased in the eighth week, declining by another 77,100 tons, or 4.5% in two weeks.

During the same period, daily concentrate production at these mines declined sharply after rising in the previous two weeks, down 4,500 tonnes per day in two weeks to an average of 510,100 tonnes per day, a nine-month low. The utilization rate of the enrichment capacity of the mines was also the lowest in nine months and amounted to 65.33%, which is 0.58 percentage points lower than in the previous two weeks, when the increase was 0.06 percentage points.

Daily output of miners in most parts of China declined last week as some mines shut down earlier to allow workers to begin traveling to their cities ahead of Chinese New Year (CNY) next week.

Mysteel noted that of the seven regions surveyed, the largest decline in production was seen among miners in Northern China, as the concentrators were temporarily shut down due to insufficient ore reserves from the ranks.

Meanwhile, some miners in Northeast China were forced to cease production last week, which also affected lower daily concentrate production. “The re-emergence of COVID-19 in three provinces in Northeast China has led to the suspension of operations in some mines,” said a Shanghai-based analyst. Frosty weather conditions in the region over the past two weeks have also impacted production, she said, as cold temperatures make it difficult for mining.

In addition to the drop in daily production, demand for concentrates from steel companies remained robust during the week of the review, and steelmakers continued to add large volumes to meet their replenishment plans prior to the RMB hiatus. At the same time, the mines have actively sold off their reserves, noting recently the high price for concentrates. As a result, sales have become stable.

By February 5, the offer price of 66% concentrates in Tangshan, Hebei province in northern China, has increased by 43 yuan /dmt ($ 6.6 /dmt) since January 22nd