Chinese iron ore futures ticked higher on Monday as stockpiles at the country’s ports dropped for a third straight week, reflecting firm demand as buyers sought cheaper cargoes.
Stockpiles of imported iron ore at China’s ports fell by 900,000 tonnes to 110.65 million tonnes on Friday, according to industry consultancy SteelHome which tracks inventory at 44 Chinese ports.
The port stocks, however, remain not too far below a record high of 113.7 million tonnes. Commonwealth Bank of Australia said last week there needs to be a sharper decline in port inventory to outweigh the increase in supply and spur a stronger recovery in iron ore prices.
Iron ore for January delivery on the Dalian Commodity Exchange was up 0.2 percent at 674 yuan ($109.5) a tonne by midday, but still well below last week’s high of 692 yuan.
“Some mills are preferring to buy cargoes from the ports which are about $2-$3 cheaper than new shipments,” said an iron ore trader in Shanghai.
But some buyers are still facing tight credit conditions, from traders to mills, preventing them from buying shipments, said a trader in China’s eastern Shandong province.
“The flow of money is tight. Even if mills are able to sell their steel products, they don’t get paid on time. Traders are also having difficulty getting letters of credit,” he said.
Iron ore for immediate delivery to China <.IO62-CNI=SI> slipped 0.3 percent to $95.70 a tonne on Friday, according to data compiled by Steel Index, ending last week with a marginal gain.
The benchmark spot price traded within a very tight range between $95.40 and $96.00 last week. Despite recovering from a 21-month low of $89 reached in June, the raw material has stayed below $100 since falling below that level in May.
Abundant supply as top miners such as Rio Tinto and Vale ramped up output has kept a lid on prices even as Chinese demand stayed strong.
China, which buys around two-thirds of the world’s iron ore, imported 82.5 million tonnes in July, the third highest on record.
“I think the price will stabilise above $90, but getting to $100 will remain difficult,” said the Shandong trader, who has a 200,000-tonne cargo in stock and has no plans to buy near term.
On the Shanghai Futures Exchange, the most-traded January rebar contract was nearly flat at 3,089 yuan a tonne.