Steelmakers restock as iron ore buys rise

Iron ore imports by China, the largest buyer of the steelmaking ingredient, rose for the first time in four months in July, indicating steelmakers are restocking after depleting inventories.

Imports gained 8.5 percent to 51.2 million metric tons in July, from 47.2 million tons in June, according to data provided by the General Administration of Customs today. Imports fell 12 percent from 58.1 million tons a year earlier.

Chinese steel prices have risen for three straight weeks after falling 17 percent from an 18-month high on April 15, indicating demand for the metal is picking up. The Chinese government is closing old steel plants to curb pollution and has clamped down on the property market to prevent speculation.

"Steelmakers are restarting to purchase, bolstering prices," Hu Kai, chief iron ore analyst with researcher UC361.com, said. "Demand growth would probably be limited with the government's intensive measures to close plants and also because the outlook for the property market is still unclear."

The cash cost of 62 percent iron ore delivered to Tianjin port has gained 23 percent to $144.50 a ton yesterday from $117.60 a ton on July 13, according to the Steel Index.

Iron ore imports fell for the three months to June, as mills including Jiangsu Shagang Group Co and Nanjing Iron & Steel Co held off purchases because of high prices and a weakening steel market.

Plant closures

Hebei Iron & Steel Group, the nation's biggest producer, Wuhan Iron & Steel Group and more than 2,000 companies must shut outdated plants by September or lose financial support, the Ministry of Industry and Information Technology said this month.

China will shut 35 million tons of iron production capacity, 5 percent of the total, by the end of next month, according to Luo Wei, an analyst with China International Capital Corp. That compared with 21.1 million tons of closure in 2009, he said.

The nation's banking regulator last month asked lenders to conduct stress tests to gauge the effect of a drop of as much as 60 percent in residential property prices, a person with knowledge of the matter said.

Construction accounts for 70 percent of China's steel consumption, and demand may fall should property prices continue to drop, Hu said.

China's steel-product exports were 4.55 million tons last month, according to customs data issued on Tuesday.

Shipments more than doubled to 28.1 million tons in the first seven months from a year earlier, it said.