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PrintA plunge in iron ore prices and shipping costs means it’s cheaper for Chinese steel mills to buy the material from Brazil, more than 8,000 nautical miles away, than to buy the lower-grade ore being dug in their own backyard.
China’s iron ore output suffered the steepest decline in July in four years, signaling that the world’s largest metals consumer is poised to boost purchases from producers such as Brazil’s Vale and Rio Tinto.
Stronger demand may push iron ore higher, with the spot price set to gain as much as 39 percent in the fourth quarter after touching a near-three year low this week, according to estimates compiled by Bloomberg.
“We’re using almost all imported ore to feed our furnaces now as prices have become more appealing,” Wang Liancheng, an international trading manager of Hebei Tianzhu Iron & Steel (Group) Co., said by phone from Tangshan.
The company, which used to buy a quarter of its needs domestically, has switched to ore from South Africa, Australia and Brazil, he said.
Ore prices may rebound as soon as next month because of declining stockpiles in China and the nation’s rising demand for construction, Vale, the world’s largest iron-ore producer, said this month.
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