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Iron ore price at 16-month high as Chinese stockpiles drop to 3-year lows

Bottom fishing in Tianjin – pricing point for seaborne iron ore

The benchmark CFR import price of 62% iron ore fines at China’s Tianjin continued to climb on Wednesday, reaching $158.90, the highest since mid-October 2011.

The steelmaking ingredient has been boosted by restocking by Chinese steelmakers – responsible for more than 60% of global consumption – and a draw down of inventory at the country’s ports.

Stockpiles of iron ore fell to a 3-year low this week of 66.8 million tonnes, down from highs above 100 million tonnes last year.

China’s daily crude steel output rose 4.6% over the first 10 days of February to just under 2m tonnes per day.

Number 3 producer of iron ore BHP Billiton said in its results presentation yesterday that customer inventory cycles are now significantly impacting the  market price:

However, the company also warned that the cost curve for iron ore will flatten as substantially more low cost supply is under construction meaning prices will revert to mean.

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