Operating rates of iron ore mines to rise significantly in Apr

SHANGHAI, Apr 9 (SMM) – SMM expects operating rates across domestic iron ore mines to grow significantly in April as high profits incentivise mines to raise output or resume production. Environmental and safety checks are expected to be less strict than in March, and this will also grow operating rates.

Operating rates in March climbed 1 percentage point on the month to 48.9%. Rates across state-owned mines increased 1.4 percentage points, and those across private mines gained 0.3 percentage point. 

Environmental checks lowered operating rates in Hebei province by 1 percentage point, but a greater number of operational days and restarts after the political sessions raised operating rates across other regions. Safety checks after frequent accidents limited growth in operating rates.

SMM estimates that Chinese output of iron ore concentrates will grow 8.5-12 million mt in 2019, based on current prices of iron ore. Liaoning, Anhui, Sichuan and Inner Mongolia will account for most of the growth.

Hebei

Safety inspections lowered operating rates across iron ore mines in Hebei province from 41% to 40.4% in March, SMM understood that strict inspections from industrial accidents slowed recoveries across mines after the two political sessions. Environmental, safety and cash flow issues are likely to cap potential growth in concentrates output in Hebei in 2019.

In Tangshan, operating rates across mines dropped in March as poor air quality closed mines during the two meetings and the heating season. Private beneficiation plants across Qian’an city closed during March 19-31. SMM understood that some mines closed for up to three days when environmental inspection teams arrived.

Environmental concerns and the transfer of open-pit to underground operations prevented mines from resuming. Capacity at independent beneficiation plants in Tangshan that used low-grade imported fines and Fe 60% concentrates, increased 10 million mt in 2019.

Liaoning

Operating rates across iron ore mines in Liaoning rose from 63.7% to 64.9% in March. Profits of 200 yuan/mt increased production at some mines, such as a mine with an annual capacity of 800,000 mt/year in Benxi city. It had a line with daily output of 1,000 mt, and commenced another line at the end of March, growing daily output to 2,400 mt. Some mines that lacked ROM during the two political meetings reported lower output.

Output of iron ore concentrates in Liaoning is likely to increase 3-5 million mt in 2019 as mines resume production after they renew their mining licences. Over 10 mines are preparing for resumptions after they renewed their mining licences in March. 

Shandong

Operating rates in Shandong rose from 41.8% in February to 43.5% in March. Operating rates across private mines gained 1.1 percentage points and rose 2.7 percentage points across state-run mines.

High prices of iron ore and greater output of iron concentrate powder prompted private mines and state-owned mines in Shandong to raise operating rates in March. Some small mines in south Shandong were reluctant to resume production as volatile prices of iron ore made it harder to acquire licences. Mines in Taian district faced uncertain prospects of resumption due to cash flow issues, special location and high costs.

Inner Mongolia

Operating rates across mines in Inner Mongolia increased from 30% in February to 34.6% in March. Operating rates of private mines inched up 0.2 percentage point and state-owned mines gained 5.8 percentage points.

Following accidents at coal mines, the local government launched inspections on mines and some private mines suspended production for overhaul during the inspection period. This lowered the output of iron concentrate powder. As workers returned to work, some private mines resumed full production, while private mines in Wen Ge Qi remained closed due to their lack of mining licences.

Shanxi

Operating rates of mines in Shanxi climbed 0.8 percentage point to 49% in March. Output of state-owned mines rose slightly due to a greater number of operating days. Operating rates of private mines dipped 0.5 percentage point due to inspections in March. At the start of March, air pollution shuttered all private mines and plants in Luliang. 

Daily output of a large private plant in north Shanxi fell to 3,000 mt after routine overhaul at two workshops. SMM estimates that mines in Shanxi will be hard-pressed to raise output of iron concentrate powder, with just several mines open.

Anhui

Operating rates of mines in Anhui province climbed from 65% in February to 67% in March. mines grew 3.6 percentage points and state-owned mines inched up 0.9 percentage point.

In February, two large private mines in Anhui reported a lower output because of mine accidents, but returned to normal production in March. Output of iron concentrate powder at a mine in Lujiang rose 55% from February. A mine in Huoqiu reported growth of iron concentrate, from 30,000 mt in February to 80,000 mt in March. High prices of iron concentrate prompted mines to raise operating rates in March. A greater number of operating days across state-owned mines boosted output of iron concentrate powder.

SMM expects output of iron ore concentrates in Anhui to grow 1.5-2 million mt in 2019 as high prices encourage new mines to commence operations and closed mines to resume. Mines that shut after accidents are expected to re-open in the second half of the year.

South-west (Sichuan, Yunnan)

Operating rates across mines in the south-west gained 0.7 percentage point to 54.9% in March, with operating rates of state-owned mines up 0.5 percentage point to 78.3% and private mines up 0.9 percentage point to 33.2%.

Output of a large state-owned mine in Panzhihua exceeded its quarterly targets, and this bolstered operating rates of state-owned mines in south-west China in March. As some small private mines in Sichuan reopened in March and iron ore prices remained at highs, operating rates of private mines rose slightly.

Output of iron ore concentrates in the south-west is expected to grow 1.5-2 million mt in 2019 as higher prices of iron ore concentrate and vanadium-titanium magnetite drive mines to resume production.

Other regions (Guangdong, Jiangxi, Fujian, Henan, Hubei)

Operating rates across mines in other areas climbed 1.1 percentage points to 34.2%, with rates of state-owned mines up 0.9 percentage point to 69.8% and private mines up 1.1 percentage points to 21.4%.

Some mines resumed production after workers returned to work and maintained normal output in March, which boosted operating rates. Some underground mines failed to reopen due to environmental inspections.

A state-owned, underground mine in Fujian reopened in the middle of March. According to SMM, mines across Fujian, Guangdong, and Jiangxi are expected to raise output by one million mt.