Reuters reported that China's imports of iron ore have risen for the past 2 months, but those of coking coal have dropped for the past 3, creating a seeming disconnect between the 2 key ingredients for steel making.

According to Chinese customs data, coking coal imports slumped to 2.42 million tonnes in September, a 37.5% decline from the same month a year earlier. This followed a drop of 21.7% in August and 3.2% in July and in volume terms the September figures was the lowest since May last year.

In contrast, iron ore imports have held up well despite the slowing of growth in the Chinese economy. Inbound shipments gained to 65.01 million tonnes in September, up 7.4% from the same month a year earlier and the highest in 20 months.

Firstly, the iron ore could simply have been stockpiled and not actually used for producing steel. It appears Chinese steel mills did use up inventories in the Q3, perhaps in a successful bid to send prices lower. But they have subsequently returned to buying iron ore, helping the spot price recover from the year low of USD 86.70 a tonne on September USD 5 a tonne to USD 120 a tonne on Thursday.

The steel output said that much of the imported iron ore is being consumed with steel product output rising to 80.43 million tonnes in September, a gain of 4.9% from the year earlier and 2.1% up from August 78.8 million.

Meanwhile, it's possible that domestic coking coal output has increased negating the need for imports, but this again seems unlikely given anecdotal reports of coking coal miners struggling to even maintain production levels in the face of weaker prices.

Source - Reuters

(www.steelguru.com)