China’s Iron Ore Import to Cross 100 Million mt; ASX Iron Stocks Savoring the Short-term Rally

Iron ore prices extended the upward rally and lifted spirits of the ASX-listed iron ore stocks. The prices of iron ore rose on the Dalian Commodity Exchange in China from the level of RMB 598.50 (Day’s low on 18 October 2019) to the level of RMB 642 (Day’s high on 28 October 2019), which underpinned a price increase of over 7 per cent.

Iron ore Port Deliveries to Increase

Iron ore demand in China again inched up in the wake of deadlines of the environmental curbs in the most prominent steelmaking province of China- Tangshan. The iron ore inventory along the 35 significant ports in China stood at 118.79 million tonnes (as on 25 October 2019), up by 1.09 per cent against the previously reported level of 117.51 million tonnes.

However, the environmental curb in China limited the port deliveries to stand at 2.62 million metric tonnes for the week ended 18 October 2019, down by 163,000 metric tonnes on a weekly basis and 147,000 metric tonnes on a yearly basis.

The industry experts anticipate the iron ore port deliveries to increase again as the environmental curbs deadline approaches in some major steelmaking provinces of China.

Iron Ore Imports to Exceed 100 million mt in China

The iron ore imports in China hit a 20-month high in September 2019 with the crude steel production going up in China. The iron ore imports are estimated by the industry experts and speculators to resume climbing and to reach a record high in October 2019.

Over 100 million metric tonnes of seaborne iron ore, which was consumed in the steelmaking sector, is likely to enter China in October 2019, which as per the market would be the third time in record, where domestic monthly imports of iron ore surpass 100 million metric tonnes.

As per the customs data, the iron ore and concentrates import in China rose for the third consecutive month in September 2019 to stand at 99.36 million metric tonnes.

The estimated increase in the imports of iron ore is likely to benefit the ASX iron ore stocks, which previously soared amid the supply shortage and felt the pressure of the fall in iron ore demand amid global geopolitical tensions.

China’s Crude Steel Production

China’s crude steel production stood at 82.8 million metric tonnes in September 2019, which in turn, witnessed a surge of 2.2 per cent against the previous corresponding month in 2018- as per the data from the World Steel Association (or WSA).

The crude steel production across the 64 countries dipped by 0.3 per cent against the previous year in September 2019 to stand at 151.5 million metric tonnes, while the production in China witnessed a 2.2 per cent yearly surge.

The global steel production soared by 3.4 per cent (on a yearly basis) to stand at 156 million metric tonnes in August 2019.

The fall in the crude steel production across the major 64 steel-producing countries coupled with the increased production in China in September 2019 could be supportive for the ASX iron ore stocks as the Australian iron ore supply chain enters majorly in China, which is currently leading the crude steel supply chain.

Australia’s Iron Ore Exports

Australia holds 29 per cent of the world’s iron ore reserve and is the largest exporter of iron ore in the world. The nation exported 835 million tonnes of iron ore in 2018, generating an export revenue of $64 billion.

The Australian Department of Industry, Innovation and Science (or DIIS) forecasts an average price of USD 80 a tonne (FOB basis) in 2019, and the department further anticipates a decline of USD 23 a tonne (FOB basis) in 2021.

As per the DIIS, the iron ore prices would average around USD 57 a tonne in 2021 as the seaborne market gradually returns to balance post supply issues, which supported the prices to reach multi-year high previously.

Also Read: Mining Companies Underway to Restore Iron Ore Production- Mining Stocks Rio and BHP Under focus

The DIIS further predicts the export revenue to climb up to $77 billion in 2018-2019, then to $81 billion in 2019-20, before finally dropping to $65 billion in 2020-2021 as seaborne prices normalise amid restored supply.

The Australian iron ore exports are projected by the DIIS to remain largely steady at just over 900 million tonnes till 2021.

To Know More and to access the price outlook, Do Read: How tall Could ASX-Listed Iron Ore Miners Stand Against the Backwardation in Iron Ore Futures?

ASX Iron Ore Stocks

Major iron ore stocks such as BHP Group Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO), and Fortescue Metals Group Limited (ASX: FMG) are moving upwards supported by the high iron ore prices in the global market.

BHP Group Limited (ASX: BHP)

The rise in copper prices amid tension in the Escondida mine along with increase in iron ore prices supported the stock, and the stock rose from the level of $34.690 (Day’s low on 21 October 2019) to the present high of $36.660 (Day’s high on 29 October 2019), which underpinned a price increase of over 5.67 per cent.

Likewise, other major Australian iron ore miners followed the same trajectory.

Rio Tinto Limited (ASX: RIO)

The stock of the company surged from the level of $87.390 (Day’s low on 21 October 2019) to the present high of $92.515 (Day’s high on 28 October 2019), a price gain of over 5.86 per cent.

Fortescue Metals Group Limited (ASX: FMG)

The stock rose from the level of $8.160 (Day’s low on 18 October 2019) to the present high of $9.110 (Day’s high on 29 October 2019), which represented a price increase of over 11.64 per cent.

Not just the major iron ore miners, the junior iron ore miners also witnessed a healthy gain.

BCI Minerals Limited (ASX: BCI)

The stock rose from the level of $0.160 (Day’s low on 10 October 2019) to the present high of $0.180 (Day’s high on 29 October 2019), a price gain of 12.5 per cent.

Champion Iron Limited (ASX: CIA)

The share prices of the company rose from the level of $1.920 (Day’s low on 24 October 2019) to the present high of $2.180 (Day’s high on 29 October 2019), which in turn, underpinned a price gain of over 13.50 per cent.

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