Bloomberg News

China Iron Ore Imports at Cheapest to Local Supplies in 3 Years

November 01, 2011

Oct. 31 (Bloomberg) -- Iron ore imports into China fell to the cheapest compared with the local price of the steel-making ingredient in at least three years.

Prices at the northeastern port of Tianjin declined to about $43 a metric ton, or 23 percent less than domestic supplies at nearby Hebei and Tangshan as of Oct. 28, according to data from The Steel Index and Beijing-based researcher Antaike Information Development. The discount is the largest since October 2008, when Steel Index began publishing an import price. Brazilian producers shipped record cargoes in the three months to Sept. 30, according to customs data from both nations. Iron ore exports from Australia were a record in August, government data show.

China’s domestic ore is becoming increasingly expensive to produce, costing $130 a ton to mine, HSBC Shipping Services Ltd. said in an e-mailed report Oct. 28. Import prices, including freight, tumbled 35 percent since early September.

“China’s average production costs are reckoned to be about 20 percent higher than last year, while the iron content is in sharp decline, making its ore vulnerable to import substitution,” HSBC Shipping said in the report.

The world’s three biggest ore producers are Vale SA, based in Rio de Janeiro, and Rio Tinto Group and BHP Billiton Ltd., both of which ship predominantly from Australia. The spot price of international cargoes in China, the biggest buyer, fell to $116.90 a ton, the lowest since Dec. 29, 2009 on Oct. 28, according to data from Steel Index.

Charter rates for ore-carrying capesize ships rose to the highest in 2011, at $31,998 a day, on Oct. 25.

For the purposes of the calculation, the international price was increased by 17 percent to reflect the fact Chinese prices include tax. Both were normalized to assume 64 percent iron content ore.

--With assistance from Alaric Nightingale in London. Editors: John Deane, Claudia Carpenter

To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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