The China Iron & Steel Industry Association (CISA) is blaming supply shortages caused by unexpected shocks for the drop in China’s iron ore import volumes.
The decision yesterday by the US to sanction Iran’s mining sector will only exacerbate the supply problem.
CISA deputy general director Wu Jingjing attributes the decline of Chinese iron ore imports to supply shortages caused by the Vale dam disaster and disruptions recently suffered by Australian producers.
Speaking at the Singapore Exchange-organised Singapore Iron Ore Forum held in Singapore today, Wu claims there is no problem with Chinese iron ore demand.
He stressed that Chinese steel production will continue to grow, as will the country’s demand for iron ore.
“We continue to see positive growth in the steel market. During the first quarter of this year crude steel production growth has been steady, in fact higher than in comparison to other years.”
Wu noted that Chinese steel exports during the first quarter grew by 12%, and that the supply/demand situation in the country remains good.
Steel prices, he added, are rising as demand picks up.
However, Wu explained that the problem that China currently faces is a shortage of iron ore supply caused by incidents such as those that have impacted the output of Brazilian and Australian producers.
US sanction on Iran’s mining industry will only make the supply situation tighter, and put further pressure on Chinese steelmakers who are already suffering from the rising costs of raw materials.
Commodities traders, speaking to TradeWinds on the sidelines of today’s Singapore forum, said it was likely that the price of iron ore, currently trading at around $95 per ton, could rise to above $100 per ton once the Iranian supply is forced out of the market.
Importers of Iranian iron ore have been given 90 days to wind down contracts. The bulk of these importers are from China, which imports over 90% of the iron ore Iran makes available for export.
Jeffries analysts quoted in the Financial Times estimated that Iran exported almost 14 million tonnes of iron ore in 2018, accounting for one percent of total seaborne iron ore supply for the year. They had expected Iranian exports to increase to 20m tonnes this year as a result of the Vale supply issues.
The new sanctions target Iran's steel, copper, aluminum, and mining sectors, which account for approximately 10 percent of the country’s export economy.
