July was the fourth consecutive month that iron ore imports exceeded the same period last year. In the first seven months of this year, iron ore imports increased by 11.8%, or 69.5 million tons, which is equivalent to the loading capacity of 300 super-large ore ships (230,000 tons).
China's demand for iron ore, and the resulting increase in shipping demand, has boosted the rental income of Capesize ships, which averaged US$24,500 per day in July. China’s iron ore import price in July averaged US$97.1/ton, which was an increase from June but lower than the price in July 2019.
Peter Sand, chief shipping analyst at BIMCO, asked: "The reversal of the trend of replacing imported iron ore with scrap metal in the past few years is puzzling. The increase in steel production does not explain the increase in imports. They are just increasing tensions with Australia. Time hoarding?"
Given that the Covid-19 epidemic has caused a slowdown in the Chinese economy, record iron ore imports have run counter to expectations. In the first six months of this year, China's steel production, which is mainly composed of iron ore, increased by 1.4%. In the past two years, steel production has grown much higher than iron ore imports, and the reversal we have seen this year is puzzling.
Iron ore imports increased, but steel production did not increase accordingly. This may be caused by several factors, including the interruption of domestic supply of scrap steel and restricting the use of electric arc furnaces, thereby increasing the share of domestic iron ore production.
