BEIJING, Aug. 10 -- Iron ore importers in China responded to falling spot prices in June by increasing imports last month, muting assertions that Chinese demand for the steelmaking material is softening.
July's imports rose 8.5% compared with June, to 51.2 million metric tons, though they fell 11.8% from extraordinarily high levels last July, data from the General Administration of Customs showed Tuesday. Iron-ore imports between January and July totalled 360.4 million tons, up 1.5% from the year-earlier period.
In June, the Baltic Dry Index was less than half May's level, prompting warnings that a slowing Chinese property market and Beijing's policy moves to discourage ore imports had succeeded in slowing this segment of commodity trade.
But Chinese demand was reflected in firming spot prices, which have steadily recovered since mid-July to $150 a ton after falling to a low of $123/ton.
Steel capacity expansion in China is expected to continue apace despite government measures to contain the industry, with steel consumption likely to rise by 9% to 552 million tons in 2010 and another 5% to 580 million tons in 2011, Standard Chartered said in a research note last month.
"China has to import iron ore to meet demand from domestic steel mills, as its low-grade domestic ore reserves are insufficient to support the growth in steel making," the bank's commodity analyst Judy Zhu said.
Domestic iron ore output has risen, prompting the China Iron and Steel Association to boast last week that the domestic product has supplanted foreign ore.
But domestic ore has high production margins, swiftly becoming uneconomic once foreign spot ore falls to around $130/ton.
Meanwhile, China's steel output capacity is projected to grow to 660 million tons this year, a 20% rise on year, the China Iron and Steel Research Institute said at an industry conference last week.
This comes despite a series of government moves to curtail steel output capacity, the latest being a missive over the weekend calling on 175 steelmakers to weed out specific portions of obsolete capacity by the end of September.
China's seaborne ore imports will rise 7% in 2010, to 672 million tons, Standard Chartered estimated, even as domestic ore output tops 1 billion tons for the first time this year.
China's steel product exports in July continued to grow at a blistering clip, more than doubling from a year earlier to 4.55 million tons, while net exports stood at 3.15 million tons.
However, August steel exports are largely expected to dip, as a government decision to revoke an export tax rebate on such products took effect in mid-July.
China's reviving appetite for commodities is also reflected in nonferrous metal shipments, with copper imports in July rose 4.5% from June, despite a 16% on-year decline, the Customs data showed.
Analysts said the data was broadly in line with expectations, showing the lagged effect of import deals struck in April when prices in Shanghai were significantly higher than in London.