China's iron ore import prices are likely to come under pressure in March, as the expected increase in domestic steel output is unlikely to offset the impact of persistent iron ore oversupply in China, the China Iron & Steel Association said in its February iron ore market report released Thursday.
Warmer weather in China will result in a recovery in domestic steel demand to some extent and this will cause a moderate increase in steel output in March as well as the second quarter of this year, but iron ore prices will probably soften further because of oversupply, CISA said in its monthly report.
The association estimated that China's daily crude steel output was 1.993 million mt over January 1-February 20 this year, down 6.3% from the daily average over January-February 2013.
CISA estimates China's total crude steel production based on its more than 80 member mills, which account for about 80% of China's total steel output.
In contrast, China's iron ore imports hit a record high of 86.83 million mt in January this year, up 33% year on year, while the country's imported iron ore stocks at Chinese ports totaled 106 million mt at the end of February, the highest it has been since end January 2013, CISA said.
CISA said the widening losses among Chinese steel mills since January this year -- due to falling domestic steel prices -- will also pressure imported iron ore prices in March, similar to the situation in January.
CISA's member mills, mostly medium and large-sized producers, reverted to a combined loss at Yuan 1.1 billion ($179 million) in January this year, compared with a profit of Yuan 7 billion in December 2013, it said in the report.
Wang Yingsheng, a senior CISA official, said at an iron ore conference in East China's Jiangsu province last week that 43% of its member mills reported losses in January, compared with over 30% in the whole of 2013.
The market outlook for the Chinese steel industry is expected to remain dismal for the rest of 2014, he said, as domestic steel mills, amid a limited increase in steel consumption and existing steel overcapacity, will continue to compete aggressively with each other, mainly through prices.
China's imported iron ore prices fell to $116.09/mt CFR China on February 28, down 5.5% month on month, according to the CISA report.
