SHANGHAI, Sep 8 (SMM) – The average capacity utilisation rate of domestic iron ore mines stood at 57.7% in August 2022, down 1.4 percentage points MoM. Iron ore concentrate output was 21.72 million mt, a decrease of 530,000 mt from the previous month. Output of state-owned mines fell 3.8% to 11.28 million mt, and that of private mines dropped 0.8% to 10.45 million mt.
The reasons for the falling capacity utilisation rates in August include:
1. In August, the production of mines was affected by the power rationing amid high temperatures. Some large mines in Shandong and Anhui provinces could only run at half of full capacity.
2. In Hebei, Liaoning and Henan provinces, the ROM output was insufficient with declining quality.
3. Safety and environmental protection inspections were carried out in Shanxi and Jilin provinces.
4. The resurgence of pandemic led to a decline in mine production in Hebei, Liaoning and southwest China.
5. Mines in Liaoning, Fujian and southwest China cut the output due to low prices and poor demand.
At the same time, the capacity utilisation rates also saw some increase in certain areas. For example, the production capacity utilisation rates of mines in Inner Mongolia and Guangdong elevated thanks to the resumption of production and technical transformation. The construction activities were brisk in Xinjiang, where the blast furnaces resumed the operation and the demand for winter stockpiling increased.
As the temperature gradually drop in September, the power rationing policy in many areas will end soon, prompting the production resumption of mines. According to SMM survey, it is estimated that 15 blast furnaces will resume the production in September with a daily increase of 50,000 mt in pig iron output. Meanwhile, some mines are also expected to raise the output with recovering demand. However, owing to the upcoming Two Sessions and the impact of the mine accident in early September, the supply of explosives was suspended in Hebei and Shanxi. As the ROM stocks are consumed, it is predicted that some dressing plants will have to halt the production due to insufficient ROM in mid to late September.
On the whole, with the arrival of the peak season in September and October, domestic ore prices has upward momentum. Therefore, SMM expects that the capacity utilisation rates of domestic mines will increase slightly.
