China’s Iron Ore Imports to Rebound Next Year, Macquarie Says

Iron ore imports to China, the world’s biggest consumer of the raw material, may rebound next year as Brazilian and Australian producers increase supply, according to Macquarie Group Ltd.

“The growth in iron ore consumption will come from increases in seaborne supply,” Macquarie analyst Graeme Train said today at The Steel Index conference. “China will import every ton of ore available to it on the seaborne market as a first choice and the gap between its total demand and seaborne availability will then be filled with domestic production.”

China’s iron-ore imports fell 2.2 percent on-year to 503.3 million metric tons in the first ten months, customs data show, as government measures to curb speculation in property trimmed demand and provinces including Hebei, Shandong and Zhejiang restricted power to mills to meet energy-consumption targets. Still, demand growth is expected to remain “robust,” even as economic expansion slows, Rio Tinto Group said in October.

Global seaborne supply of iron ore may rise 8.5 percent to 1.1 billion tons next year, Train said in a slide for the conference in Shanghai. Chinese demand may rise 15 percent to 712 million tons in 2011, compared with a forecast 5.4 percent drop in Europe, according to the slide.

“Steel production outside of China has recovered in 2010. That has reduced availability of seaborne ore to China,” Train said.

China’s domestic ore production, on a 62 percent-iron equivalent basis, will remain at around 300 million to 320 million tons annually over the next three years, Train said.

Rio Tinto, BHP Billiton Ltd. and Rio De Janeiro-based Vale SA, the biggest iron ore supplier, abandoned annual pricing this year in favor of quarterly agreements as spot prices rose. Steelmakers in China may pay 4 percent to 7 percent more for the raw material in the quarter starting Jan. 1 than the previous three months, The Steel Index, a London-based publisher of industry data that’s majority-owned by Steel Business Briefing, estimated today in a slide.

Spot prices for 62 percent-iron ore arriving China’s Tianjin port have gained 40 percent this year to $167.1 a ton as of Dec. 6, according to The Steel Index.

Iron ore price may trade at $130 to $150 a ton over the next three years, and may be over $100 ton a ton over 2015, Train said.

--Helen Yuan. Editor: Alan Soughley