Despite multiple disruptions, the capacity utilization rate of domestic iron ore mines increased slightly in April, but with bleak future growth

According to SMM, the capacity utilization rate of domestic iron ore mines in April was 57.2%, up 0.5% MoM. The output of iron ore concentrates in April was 20.647 million mt, down about 490,000 mt MoM, mainly due to fewer production days.

Reasons: 1) Since April, more blast furnaces have resumed production, bringing increasing output of pig iron, which drove up demand for iron ores. 2) Purchases from steel mills before the Labour Day holiday and active shipments from mines. 3) More mines resumed production in some areas. For example, in Tangshan, 5-6 local beneficiation plants may resume production in the near future, mainly concentrated in Zunhua, elevating local iron ore concentrate output. In Xinjiang, after the weather warmed up, many local mines restarted. However, since the production resumption was mostly in late April or even the last week of the month, the growth in the month was limited. 4) A few mines boasted high-quality ores and large output in April, further pulling up production.

However, factors dampening iron ore production varied in April.

SMM noted that in April, the production of some mines in a few regions such as Inner Mongolia, Liaoning, and Shanxi slowed down, affected by safety and environmental protection inspections. Some non-compliant small mines shut down for maintenance. The impact of environmental protection inspections on Inner Mongolia and Liaoning weakened in May, but that on Shanxi continued. It is still difficult for mines in northern Shanxi to resume production in May. In addition, the second batch of the third round of central environmental protection inspections has been fully launched. Seven central teams have been set up to carry out inspections in seven provinces (municipalities) including Shanghai, Zhejiang, Jiangxi, Hubei, Hunan, Chongqing and Yunnan for about one month, which will affect the production of non-compliant mines in those regions. However, since these regions are not the main production areas, the impact is expected to be limited.

Domestic beneficiation plants have high processing capacity, but face ROM shortages. A few beneficiation plants purchase ROM to produce a small amount of iron ore concentrates. However, in April, beneficiation plants said their production had declined, mainly due to tight ROM supply and high prices.

In addition, mines along the Yangtze River said that this year may see the early arrival of flood season. They will make preparations for flood prevention and control in advance, which may influence production of mines.

SMM expects that the capacity utilization rate of mines in May will hold stable and barely increase.