China iron ore stocks rise despite clearance order
Wed May 28, 2008 10:28am BST
uk.reuters.com
By Alfred Cang
SHANGHAI, May 28 (Reuters) - China is finding it harder than expected to clear out iron ore stocks that are overwhelming its ports, a senior official said on Wednesday, as stocks creep up past 80 million tonnes.
Severe congestion at northern Chinese ports is contributing to a rise in freight rates, which hit all-time highs last week.
That in turn has weakened Chinese steel mills' bargaining position as they try to limit term price increases from Australian iron ore suppliers.
"As soon as we moved a bit, the ships still queuing up to discharge their cargoes delivered ore to the warehouses," Luo Bingsheng, secretary general of the China Iron and Steel Association, told reporters at a conference in Shanghai.
The National Development and Reform Commission, China's top planning body, met the week before last to work out measures for reducing port stocks of iron ore, while the port of Tianjin will raise warehouse fees to encourage traders to move stocks.
Led by the NDRC, government bodies and departments will send out monitoring groups to ports to help move out stockpiles, Luo told Reuters.
Stocks have risen as speculators bet that Chinese mills would have to agree to pay Australian miners more than the rises of 65 and 71 percent in term prices that they ironed out with Brazilian miner Vale (VALE5.SA: Quote, Profile, Research) earlier this year.
Luo said it would be "entirely normal" if warehouse stocks now exceeded 80 million tonnes, but did not give an updated figure. Warehouse stocks were at 79.22 million tonnes as of May 15.
Port congestion has supported freight rates and spot iron ore prices, leaving Chinese mills in a tough position once the previous year's term prices are no longer valid on June 30.
Miners Rio Tinto (RIO.L: Quote, Profile, Research)(RIO.AX: Quote, Profile, Research) and BHP Billiton (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research) argue that they should get more for their ore than Vale, to offset the lower cost of shipping from Australia to Asia.
Luo reiterated that Chinese steel mills would not accept the Australian demand to add freight rates to iron ore prices. (Writing by Lucy Hornby; Editing by Edmund Klamann) |
