Iron Ore Stockpiles at China Ports Jump to Highest Since ‘14

(Bloomberg) -- Iron ore stockpiles held at China’s ports have expanded to the highest level in almost two years, an increase that Australia & New Zealand Banking Group Ltd. said reflects steel mills’ optimism about the outlook for demand and prices in the top producer.

Inventories climbed 0.9 percent to 106.75 million metric tons, the highest since November 2014, according to data from Shanghai Steelhome Information Technology Co. The holdings are up 15 percent this year after rising 2.1 percent this month, following five straight quarters of gains.

“If we hadn’t seen the pick-up in steel output and fixed-asset investment and so on recently, then we might be a little bit more concerned” about the increase in iron ore holdings at China’s ports, said Daniel Hynes, senior commodities strategist at ANZ. “But it does seem to be demand-driven.”

China’s is the world’s largest buyer of iron ore, and the port holdings form part of jigsaw of indicators that banks and investors assess as they seek to anticipate the likely course of prices, with rising holdings sometimes taken as a signpost of rising supply that can be negative for rates. Iron ore and steel have gained this month, tugged higher by a rally in coking coal in China to a record, while steel production has been sustained after government stimulus. 

“With the more positive outlook on prices that a lot of steel mills have had, they are taking the opportunity to restock,” Hynes said by phone from Sydney after the weekly ports data were released. “That’s why we’re seeing port inventories rising.”

Record Rally

Coking coal in China has surged to an all-time high this month amid a supply crunch. That’s helped to spur gains in related raw materials, including steel and iron. Ore with 62 percent content rose 0.7 percent to $64.38 a dry ton on Monday, the highest since April, according to Metal Bulletin Ltd. Iron ore futures in Dalian and Singapore rose on Monday.

There are competing views on where prices will go next. Morgan Stanley has said the commodity’s outlook in the fourth quarter is deteriorating as holdings expand, while UBS Group AG warned the period from November may mark a “death knell” for prices.

Still, Toronto-Dominion Bank has said although more supply is coming, demand in China may be supported as the government adds stimulus. The lender, which placed first in the latest Bloomberg ranking for forecasting iron ore, sees prices at about $55 this quarter.

To contact the reporters on this story: Jasmine Ng in Singapore at jng299@bloomberg.net, Martin Ritchie in Shanghai at mritchie14@bloomberg.net. To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Jake Lloyd-Smith