Chinese steelmakers are restocking despite uncertainty about steel demand

The ambiguous dynamics of China’s commodity imports in the first half of 2024 is more related to price fluctuations than to economic indicators. This was written by columnist Clyde Russell in his column for Reuters.

This trend is especially true for iron ore, a commodity that was expected to have problems given the weak real estate sector. However, in January-June this year, imports of this raw material increased by 6.8% compared to the same period in 2023, to 611.2 million tons.

The increase in this figure did not lead to an increase in steel production; rather, this trend indicates a restoration of stocks by steelmakers. According to the SteelHome consulting company, port ore stocks in China have increased by 35.7 million tons since the end of December 2023, reaching 150.2 million tons as of July 12, a two-year high.

The increase in ore reserves almost exactly corresponds to the increase in ore imports. The reason why Chinese commodity traders and steel mills are building them up amid uncertainty about steel demand is the price.

In the first quarter of this year, iron ore prices on the Singapore Exchange tended to decline, while in the second quarter they consolidated at lower levels.
In early January, contracts for this raw material reached $143 per tonne, the highest level in 2024. In early April, quotes fell to $98.36/t. Since then, the price has been moving in a relatively narrow range, and on July 17, it amounted to $107.48/t.

In January-June 2024, China reduced steel production by 1.1% y/y– to 530.57 million tons. In June, steel production in the country fell by 1.3% compared to May, to 91.61 million tons, which was caused by lower demand and a reduction in steelmakers’ margins. At the same time, this figure increased by 0.2% compared to the same period last year.