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As a result of China’s diversification of supply sources and deepening industry upgrading, analysts predict that the proportion of China’s total iron ore imports will fall for the first time since 2015, which is especially true given the country’s commitment to achieving low-carbon targets.
Dealers stockpile as Iron ore prices rise dramatically
Iron ore prices have risen dramatically in the week leading up to the Chinese New Year, as dealers and manufacturers stockpile raw materials in anticipation of a potentially more significant imbalance between supply and demand in the coming months. According to S&P Global Platts, the 62 percent Fe Iron Ore Index was valued at $147 per ton on Friday, the highest price in five months.
The rising oil price has led to an increase in Chinese imports. Per statistics from industry data platform Mysteel, the total stockpile of iron ore imported by steel mills in China reached around 117.57 million tons this week, representing an increase of 470,200 tons over the previous month.
Rio Tinto shipping forecast
A source from the Rio Tinto Group said that the market price rise might be due to seasonal speculation and stockpiling. “There will be stockpiling [in China] every year before the Spring Festival,” an industry insider said.
However, a scarcity of personnel owing to influenza limitations in Western Australia may disrupt manufacturing capacity, according to the source. However, despite the difficulties, the company is still operating at total capacity, and it is possible that production will not be affected.
The company’s shipping forecast for 2022 is 320 million-335 million tons, which is around the same level as the company’s forecast for 2021. Beyond Rio Tinto, two other major global miners – BHP Billiton based in Australia and Brazilian company Vale – announced their iron ore production guidance targets for 2022, consistent with the current production forecast.
The media have reported that iron ore imports from Australia and Brazil have represented nearly 80 percent of total imports since 2015, with imports from Australia accounting for more than 60 percent of total imports in recent years. Relations between the two countries have lately deteriorated due to Australia’s aggressive approach toward China, which has disrupted economic activity. China’s need for iron ore exports is one of the few remaining items that are still in high demand inside the country, partly owing to the demands of the country’s building industry.
Iron ore price gouging as NDRC tightens its grip
On the other hand, according to an industry source who spoke on the condition of anonymity to the Global Times on Saturday, the share of Australian imports in 2022 is anticipated to go below 60 percent. After having been 61.6 percent in 2021, 62.5 percent in 2020. Because of the rise in iron ore price, the National Development and Reform Commission published a paper on Friday committing to tightening its grip on illegal practices such as price gouging and malicious speculation while implementing more effective measures to maintain price stability.
The Global Times reported that other measures to ensure a sustainable supply of iron ore resources are likely to be implemented, including a greater diversification of supply sources, particularly domestic mines. Wang Guoqing, research director at the Beijing Lange Steel Information Research Center, said that further diversification of supply sources, particularly from domestic mines, is expected.
Wang said that increasing the share of electric furnace steel is one of the strategies for attaining iron ore substitution and low-carbon and environmental protection goals in the future.