UPDATE 1-China Iron Ore Imports Slip, Steel Exports Jump

SHANGHAI/BEIJING, May 11 -- China's iron ore imports slipped to 55.33 million tonnes in April, down 6.2 percent from 59.01 million tonnes in March, Customs data showed on Monday.

Net exports of steel products, which had flipped to net imports in April 2009 as China struggled to find buyers abroad, hit 2.81 million tonnes in April, up 65 percent from March and the highest monthly volume since October 2008.

China, with the biggest steel industry in the world, has powered global iron ore trade in the last year and helped many suppliers weather the global financial crisis, with monthly imports ranging between 45 and 65 million tonnes, above the 25-40 million tonne range seen in previous years.

"From the standpoint of steel production growth, we are back to where we were just before the collapse of Lehman Brothers, Fabio Barbosa, chief financial officer of the world's top iron ore miner Vale (VALE5.SA: Quote), told a conference call on May 6.

"We also believe that this is nonsense about deceleration in the Chinese economy. This economy has shown resilience over time, and what we see today is an increase in the importance of domestic demand in the much more selective macroeconomic stabilisation set of measures."

But many Chinese traders and analysts are expecting iron ore imports to fall sharply in coming months, amid increasing reluctance from downstream steel mills to buy.

"This was still a big number as steel mills and traders rushed to make orders when steel prices climbed," said an iron ore trader in Rizhao city. "However, I believe iron ore imports will fall in May as steel mills and traders have started to shun the expensive material offered for as high as $200 per tonne CFR in April."

A few small privately-owned steel mills have been forced to curtail production in response to falling steel prices, and cut purchases of imported iron ore accordingly.

"My customers have closed part of their facilities because of the very tiny profit margin, and I believe iron ore prices and imports will continue to move down on the lack of real transactions," the trader added.

While iron ore prices have climbed, many buyers are nervous about talk of China's property market overheating, which could affect demand for steel products used in construction.

"I expect a slowdown in iron ore imports next month as traders have almost lost interest until late April after Beijing took action to tighten the over-read property market. However, we may see a big fall in July and August," said Jiang Zhiwei, an analyst with BOC International Futures, who said he was expressing his personal opinion.

Growth in April's net exports of steel products was the result of a 29 percent jump in monthly exports and an 8 percent fall in imports, to 4.31 million tonnes and 1.50 million tonnes respectively.