March 7, 2020 / 4:05 AM / a month ago

China Jan-Feb iron ore imports rise on firm demand despite virus disruption

* Jan-Feb iron ore imports +1.5% y/y at 176.8 mln T -customs

* Virus epidemic had limited affect on iron ore demand -analyst

BEIJING, March 7 (Reuters) - China’s iron ore imports rose 1.5% over January and February from the same period a year earlier, customs data showed on Saturday, supported by firm demand at steel mills though the coronavirus outbreak had disrupted downstream sectors.

The General Administration of Customs said last month it would combine preliminary trade data for January and February instead of releasing data for individual months. Early-year data in China is typically distorted by the week-long Lunar New Year holiday, while this year the coronavirus epidemic has also widely disrupted business.

In the first two months of the year, the world’s top steel producer brought in 176.8 million tonnes of the steelmaking ingredient, according to the customs data, compared with 174.3 million tonnes a year earlier.

The rise in purchases came as steel mills replenishing stocks ahead of China’s week-long Lunar New Year holiday which began on Jan. 24 this year and was extended due to the coronavirus outbreak across the country.

The flu-like virus had paralysed transport and forced businesses to put off resuming their operations after the holiday as the government sought to contain the spread.

Steel mills in China, pressured by high stockpiles of product due to a suspension in downstream activities such as construction, curbed their output, also cutting down on their need for raw materials.

But analysts say that the adjustment to production plans should not have a big impact on iron ore demand.

“Mills would first reduce the input of steel scrap instead of iron ore, as the former needs more manpower to collect and dismantle,” Tang Chuanlin, an analyst with CITIC Securities, said before the data was released.

Tang also said steel producers may reduce their purchases of higher grade ore due to profit concerns.

Capacity utilisation rates at blast furnaces of China’s 247 main mills was at 73.78% as of Friday, data from consultancy Mysteel showed. The country’s biggest steelmaker Baowu Steel Group said its steel units are mostly operating normally including Wuhan Iron and Steel Co, which is located in the epicentre of the virus outbreak.

Iron ore inventories at ports in China hit a three-month high of 131.1 million tonnes on Feb. 7 but have fallen back again with the resumption of transport links, according to data from SteelHome. (Reporting by Min Zhang and Tom Daly; Editing by Tom Hogue & Shri Navaratnam)

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