Stocks of Chinese iron ore traders rise to high levels

Iron ore inventories held by traders in 45 Chinese ports, according to a weekly survey by Mysteel, rose 383,000 tonnes per week in the second week to 70.4 million tonnes as of August 12, just slightly below the record 70.7 million. tons reached on July 22, the highest level. since Mysteel began conducting this research in December 2015.

What's more, traders' inventories account for 55.8% of the total ore reserves in these ports, with this share also the highest since December 2015, the data showed.

In contrast, as of August 12, total stocks of imported iron ore at 45 ports remained largely stable at 126.3 million tonnes, down in the third week, but only 110,000 tonnes, or 0.1% over the week.

“There appear to be several factors behind traders' interest in accumulated ore reserves,” said a Shanghai-based iron ore analyst. “For example, since mid-July, many domestic steelmakers have cut iron ore purchases to meet their lower steelmaking needs. Consequently, traders faced difficulties in unloading existing reserves due to reduced demand from the factories, especially when the market is dominated by pessimism and ore prices are steadily falling, ”he said.

Steelmakers reportedly began cutting production in response to Beijing's goal of cutting steel production this year from 2020. In response, many mills began to seriously control their iron ore reserves after their production plans were revised.

An iron ore trader from Shandong also mentioned that ore trading in the spot market has been persistently sluggish lately, especially with regard to stocks in ports.

“Moreover, it has been some time since some steel mills began reselling surplus ore from their long-term supply, and it was these ore cargoes that were ultimately largely taken over by the ore traders,” he added.

Meanwhile, for some large iron ore traders, many of whom are active in both the spot and futures markets, they also need to take some volume in the spot market when they are short in the futures market, the analyst added.

As of Aug 17, Mysteel PORTDEX Australian fines of 62% in Qingdao were RMB 1,133 per tonne ($ 174.7 per tonne), including 13% VAT. On the same day, the most traded iron ore contract in January 2022 on the Dalian Commodity Exchange (DCE) closed the afternoon trading session at 834 yuan per ton.