Chinas iron ore imports surged in February and March because of "fake demand" brought about by stockpiling and they are likely to fall off over the rest of the year, a government official said on Monday.
"The increase in steel production in January and February didnt lead to an increase in (end-user) demand, but all ended up in inventories," Liang Shuhe, the vice-chairman of the Ministry of Commerces Foreign Trade Department, told an industry conference in the port city of Tianjin, near Beijing. In response to the "fake demand" at the beginning of the year, Chinas steel mills and traders made the mistake of increasing their orders for iron ore, leading to record imports in February and March, he said.
"In February, some of my foreign contacts told me that Chinas steel market wasnt doing badly... but (the increase in demand) was actually a sign of weakness," Liang said. Chinas iron ore imports hit 52.1 million tonnes last month, eclipsing the previous record set in February and soaring 46 percent from March 2008. Chinas exports of steel products, at 1.67 million tonnes, were 60 percent down on the previous March.
"When steel output capacity falls later in the year, the demand for iron ore will also fall," said Liang. Iron ore has been backed up at Chinas ports for months, with little sign of demand running down the stockpiles. That has set a gloomy background for annual price talks between Chinas Baosteel and the top iron ore suppliers Vale, Rio Tinto and BHP Billiton.