As we approach the end of 2022, it is clear that – contrary to all those stories from China in recent months about the dire position of the country’s steelmakers and their appetite for iron ore – to paraphrase Mark Twain, news of their demise has been greatly exaggerated.
With just two months to go China has imported 917 million tonnes of iron ore after nearly 95 million in imports in October.
If imports are maintained around 90 million tonnes a month in November and December respectively, iron ore imports for 2022 at will come in around 1.1 billion tonnes – which is not far short of the 1.12 billion tonnes in 2021 or the 1.17 billion tonnes in 2020.
In other words, while there will have been little growth in demand and imports (and the Chinese seem to be trying to meet any extra demand from their own low-grade mines), 2022 will not have been the terrible year for Rio Tinto, Vale, BHP and Fortescue Metals that a lot of analysts and investors had been predicting.
That’s an amazing figure when it was though that the total could fall short of the billion-tonne mark midway through the year and the Chinese steel industry has survived the worsening of the property and housing slump and the impact of Covid and the various lockdowns on demand..
What makes it more astounding is that for much of 2021 and early this year the Chinese government, media and steel industry had been whining about high prices, high levels of imports, weak demand for steel, compressed margins – all the while threatening to cut imports (really, just those from Australia).
Those moans have disappeared since mid-year as demand has slowly risen. Imports were down 4.4% in the first six months of this year from the same period in 2021, but by October the discrepancy had narrowed to just 1.7% and could even disappear by the end of December.
The first 10 months of 2021 saw 975 million tonnes of ore imported – around 58 million tonnes more than for the same period this year.
The stronger demand in the second half of 2022 than in the first six months can probably be explained by price movements.
And that probably has more to do with the slide in prices from the peaks of around $US158 a tonne in early March (after the Russian invasion of Ukraine) and around $US152 a tonne in June).
The price fell to a low of around $US77 a tonne in late October. The SGX price jumped to nearly $US90 a tonne late this week for the first time in a month off the back of the fall in the US dollar after October consumer price inflation came in weaker than forecast, along with core inflation.
Reuters reported that Chinese steel mills stepped up utilisation rates during September and October, typically China’s peak construction season, expecting demand to pick up and government stimulus measures to boost activity.
But imports were rising before then – June is a big shipping month for Port Hedland with stable weather enabling the likes of BHP, Fortescue Metals and Roy Hill to maximise shipments.
The same conditions help Rio Tinto at its two Pilbara ports as well.
This year stable weather in August, September and into October helped Brazil’s Vale maintain iron ore shipments at high levels as well.
China’s trade data for October on Monday showed that imports in October again topped 90 million tonnes and also ended well above 900 million tonnes for the first 10 months of this year.
The data for Australia’s Port Hedland and China tell the story.
Exports to China from Port Hedland in October rose 7.6% from September and 6% from October last year to be more than 42 million tonnes. Not a boom but nowhere near gloom.
And yet China’s total imports in October totalled 94.98 million tonnes last month, down 4.7% from September’s huge 99.71 million tonnes, but more than 3% higher from the 91.61 million tonnes in October 2021.
Imports in October 2021 were reduced though by the impact of Covid lockdowns and the echoes of the power shortages and rationing in earlier months.
Australia’s most recent monthly performance looks better than the overall performance of China’s importers. And that seems to be the story of 2022.
Covid problems have bedevilled Chinese imports and production across the board for the past 15 months or more. But it doesn’t seem to have damaged appetite for Australian iron ore to the extent feared.
Image & Story Credit: finnewsnetwork.com.au