Reuters reported that the Chinese steelmakers’ inventories are running low and they will need to restock in the coming weeks.

Analysts expect them to turn to cheaper international ore rather than costlier, lower quality domestic output.
Mr Denny Sabah a metals analyst at London based trading house Ronly said “Logically, Chinese steel mills may buy more seaborne iron ore due to the recent drop in price. He said that a Chinese iron ore mine with, for example, a USD 140 per tonne cost of production will now be struggling to shift material.”

Macquarie iron ore and steel analyst Mr Colin Hamilton said China on Friday already well below much of its domestic supply cost. He said that “Chinese domestic supply is very flexible. Much of this supply is in the process of being cut.”

Mr Derek Langston a senior director at SSY Consultancy and Research said “Longer term, three months plus, if we have a lower price environment for iron ore, that may lead to more import substitution in China as we saw a couple of years ago.”

Mr Nigel Prentis head of research, consulting and advisory with HSBC Shipping Services Ltd said “The combination of domestic ore displacement, Indian export bans and increased supply should be supportive of the capsize segment.”

(Sourced from Reuters)