Iron ore futures dropped on Wednesday over the port congestion issues in China which were likely to ease only in late August.
Thus, the most-traded iron ore for September delivery on China’s Dalian Commodity Exchange dipped by 0.89% or RMB 7.50 day-on-day to RMB 832.50 per tonne on Wednesday, despite a late rally at the afternoon session.
Similarly, the Shanghai Futures Exchange dropped slightly by 0.57% or RMB 22 day-on-day to RMB 3,805 per tonne.
Longer processing time for import permits
There were some market concerns over the longer turnaround time for the issuing of import permits for Australian iron ore and port congestions situation in China.
As China’s commerce ministry had extended the typical 3 days for import permit issuance to 11 days for Australia-originated goods, including iron ore.
Market participants interpreted this as longer custom clearance time for the Australia-originated iron ore cargoes, which might slow down seaborne purchases.
Chinese end-users continue stockpiling in Aug
Despite the longer time for imports and port congestions, these factors did not stop Chinese end-users to continue their stockpiling processes in August.
According to data company, Kpler, there was around 54 million tonnes of iron ore cargoes arrival to China during the first half of August.
Apparently, Chinese steelmakers had been attempting to rebuild domestic inventories for a while, which resulted a record-high import volume of iron ore in July at 112.7 million tonnes.
The high import volumes were attributed to supply disruption from domestic scrap steels that lowered the utilization of electric arc furnaces and resulted in the higher usage of blast furnaces which needed more iron ore feedstocks.