Iron Ore Imports Rise to Record in China, Swelling Inventories

Feb 12, 2014 12:29 am ET

Feb. 12 (Bloomberg) -- China’s iron ore imports climbed to a record in January as some buyers used the commodity as collateral to get credit, swelling inventories that are already approaching the highest level ever.

Imports of the steel-making ingredient rose to 86.83 million metric tons in January, from 73.38 million tons in December and 65.54 million tons a year earlier, according to the customs data today. Ore stockpiles at China’s ports rose to 97.25 million tons as of Feb. 7, up 22 percent in the last 12 months and near the record 100.1 million tons set in July 2012, according to data tracked by the Shanghai Steelhome Information Technology Co.

Companies seeking funding amid government efforts to rein in lending and shadow banking are shipping more ore to use as collateral, said Xu Xiangchun, chief analyst at researcher Rising purchases by China, the world’s largest user of the material, may reduce a global glut forecast for this year by Goldman Sachs Group Inc. and Credit Suisse Group AG.

“Steel prices have fallen sharply and demand remains weak, so there are no fundamental reasons supporting such a big jump in the raw material imports,” Xu said by phone from Fuzhou today. “The only plausible reason is financing deals.”

China’s seven-day repurchase rate, a gauge of interbank funding availability, in December climbed to the highest level since a record liquidity squeeze in June. Money-market rates have since declined after the central bank injected funds.

Steel Futures

Steel reinforcement-bar futures in Shanghai traded at 3,390 yuan ($559) a ton at 11:30 a.m. local time, near the lowest level in more than 17 months. Iron ore with 62 percent iron content delivered to China’s Tianjin port fell 0.7 percent to $120 a dry ton yesterday, the lowest price since July 2, according to a price index compiled by The Steel Index Ltd.

Ore prices may correct as soon as the end of this quarter as production increases, Goldman said in a report last month, predicting prices to average $108 a ton this year.

China, which imports about 60 percent of global iron-ore output, raised purchases to a record 820 million tons last year as demand for steel from the car and construction industries increased.

--Feiwen Rong, with assistance from Stephen Tan in Beijing. Editors: Brett Miller, Jarrett Banks