Trade Resources Industry Views China Sources 84% of H1 Iron Ore From Australia

China Sources 84% of H1 Iron Ore From Australia

Tags: Iron Ore, Metals

China's iron ore demand is falling, but its share of imports from mining giants Australia and Brazil is rising, which is squeezing smaller miners and curbing their supply.

China imported 453.1 million mt of iron ore in January-June, with 83% of it coming from Australia and Brazil, up from 74% in H1 2014, according to General Administration of Customs data released last week.

The country's H1 crude steel output fell 1.3% year on year to 410 million mt, the first decline in nearly 20 years and a sign production may have peaked, the China Iron and Steel Association said.

Australia's top three miners Rio Tinto, BHP Billiton and Fortescue Metals Group, as well as top global miner Vale, all announced higher output in April-June.

"When ore prices fall below $60/dmt level, it is difficult for domestic miners to survive," a Beijing-based trader said.

"When the price fall below $50/dmt level, it is below the cost curve for many overseas small miners."

The trader said output from smaller miners has fallen sharply this year. The Platts IODEX CFR China price was assessed at $56.75/dmt Wednesday, up from a record low of $44.50/dmt on July 8.

Capesize freight rates from Australia to China have increased 15.9% in the same period to $6.20/wmt Wednesday, from $5.35/wmt on July 8.

Given weak prices and lower China demand, miners large and small are looking for any means to cut costs.

"If the price stays below $45/dmt for three months, some big producers may have financial problem not to mention small ones," an international trader said.

Supply from smaller miners has as a result become less stable, leading some steel mills to prefer buying from the top miners. But others have continued to seek out smaller miners for deals.

"For the same iron content, non-mainstream ores is $3-$5/dmt cheaper than mainstream ores," said a steel mill source that buys regularly from small miners, adding that the discount applies mostly to low iron content fines used for blending.

Another steel mill source said most products are currently difficult to source in the spot market except for Pilbara Blend fines from Rio Tinto, and Newman fines and Yandi fines from BHP Billiton.

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China Sources 84% of H1 Iron Ore From Australia, Brazil; Share Seen Rising
Topics: Metallurgy