China's iron ore imports surge in July as steelmakers stockpile

China's iron ore imports surged in July for the first time in four months as steelmakers start to stockpile depleted inventories ahead of a potential increase in the second quarter iron ore price contracts.

According to the data released today by China's General Administration of Customs, China's iron ore imports rose by 8.5 per cent to 51.2 million metric tonnes in July, from 47.2 million tonnes in June.

The increase in July followed three consecutive months of decline, reaching 47.2 million tonnes in June, as steelmakers held back buying because of high prices of iron ore and a sluggish domestic market.

Total import for the first seven months ending July was 360 million tonnes, up by 1.5 per cent from a year earlier.

Iron ore cash price delivered to Tanjin port was $144.50 a ton yesterday, up by 23 per cent from $117.60 a tonne in mid-July, according to the Steel Index.

Chinese steelmakers had increased iron ore imports in June as the new first quarter contract with the big miners ended in June and the miners are expected to raise prices by 5-10 per cent for the July quarter.

According to analysts, some traders may have resorted to speculative buying in July hoping that steel production that had slowed down since past three months would rebound in August.

The construction sector, which constitutes about 70 per cent of China's steel consumption, slowed down as the country's banking regulator told banks to rein in lending on concerns that the country's state-owned banks may have to write-off nearly $253-billion in bad loans as well as an economy that could be overheating. (See: Chinese manufacturing output contracts for first time in 17-months)

Chinese steel exports also declined to 4.55 million tonnes in July, down by 19 per cent compared to June, but doubled to 28.1 million tons in the first seven months from a year earlier.