Iron ore price blasts to 3-month high
Chinese steel mills are humming and rapidly depleting domestic iron ore mines already grappling with low grades face tough new environment rules from Beijing translating into surging demand for imports.
The price of iron ore jumped to a three-month high on Tuesday on robust Chinese economic activity data showing continued strong growth particularly in construction and a rebound for its steel industry.
The benchmark CFR import price of 62% iron ore fines at China's Tianjin rose 1% to $138.20 a tonne on Tuesday a level last seen at the beginning of September according to data provided by SteelIndex.
While China's official Purchasing Managers' Index indicated overall economic activity slowed slightly from October's 14-month high, the sub-index for construction was buoyed by a stronger property market.
A figure above 50 shows expansion and the building index climbed to 63.5 from 62.0 according to the China Federation of Logistics and Purchasing while the steel industry index bounced back to 49 in November from 47.5 in October.
While steel activity remained in contraction mode last month new export orders for Chinese steelmakers jumped to 56 from 49.2 in October, showing much stronger growth down the line.
China buys roughly 70% of the world's seaborne iron ore trade which is expected to top 1.1 billion tonnes of the steelmaking ingredient this year.
Cargoes from the world's largest exporters in Brazil, Australia and South Africa have been edging out domestic supply, with imports into China reaching a record high of 74.6 million tonnes in October.
Chinese iron ore miners struggle with low grades and high costs and domestic supply is expected to reduce further after Beijing instituted stricter environmental standards for the highly fragmented industry in November.
World number one producer of iron ore Vale at an investors conference held in New York yesterday said concerns about a flood of new supply coming on stream are overblown and that one third of additional iron ore production by 2020 will "simply replace depleted mines".
The Wall Street Journal reports Vale is predicting global steel production to grow 23% between 2012 and 2020.
China's blast furnaces forge almost as much steel as the rest of the world combined and as the country's iron ore mines are becoming depleted, Vale sees the seaborne trade surging 34% to 1.5 billion tonnes by the end of the decade.