China Iron Ore Output Expected to Fall in November after Setting New High in October

SHANGHAI, Nov. 21 (SMM) -- According to China’s National Bureau of Statistics (NBS), China’s iron ore output was 132.41 million mt during October, up 3.85% MoM, and up 38.67% YoY. Total output from January to October was 1.069 billion mt, up 22.78% YoY, already exceeding output in 2010. China’s dependency on imported ore has fallen significantly to 62.1%, down from 72.54% in September, due mainly to significant declines in iron ore imports. Steelease believes data from the NBS may not be affected by the market since it mainly covers large mining enterprises. In addition, production at mines even grew slightly in October due to the end of rainy season. However, a recent Steelease survey shows that operating rates at small and medium mines were down slightly in October. Some higher-cost mines have been forced to suspend production as iron ore prices fell sharply. Although domestic iron ore prices show signs of stabilizing, Steelease believes iron ore output in China will decline in November, especially in North China. 

Many mines in North China like Inner Mongolia suspend production due to the cold weather during winer months, since operational costs in winter will be much higher than those in summer. As the weather gets colder, the grade of diesel oil needed for mining will be higher in response, with the grade ranging from #0 to #-50. Higher-grade diesel oil will be more expensive. For example, prices for #0 diesel oil are only RMB 3.94 per liter in Chifeng region, Inner Mongolia, while prices for #-30 diesel oil are RMB 7.88 per liter, up about RMB 0.94 per liter. In addition, energy consumption per unit of product will increase as well. At present, many mines in Inner Mongolia suspend production due to cold weather, low iron ore price, high costs and weak demand.