BEIJING: China produced 116.57 million tonnes of iron ore in August, inching up 1 percent from July and defying expectations of a large output cut as domestic demand held up despite plunging global prices.
Data released by the National Bureau of Statistics on Tuesday also showed that crude steel output across China fell 4.8 percent on the month to reach 58.703 million tonnes, with producers cutting runs to reflect falling demand and prices.
Despite weak steel demand, China imported 62.45 million tonnes of iron ore in August, up 7.9 percent from July, and some suggested that a rapid fall in iron ore prices over the month had forced out high-cost, low-grade domestic producers.
But Tuesday's data shows the dynamics in the international and domestic iron ore markets are not always entirely in sync, said Graeme Train, a steel analyst with Macquarie in Shanghai.
"What happened was that domestic prices held up to a reasonably high level and only started to fall in the last two weeks," Train said.
Global iron ore prices shed nearly a quarter of their value in August, making it uneconomical for high-cost producers to remain in operation, but Train said there has not been enough time for the low global prices to affect China's mines.
"If iron ore prices at around $85-$90 were reflective of actual demand, and if they held at that level, then we would definitely see replacement of domestic iron ore," he said.
He said domestic suppliers are often favoured when the market is falling, with buyers able to secure their orders more quickly and thus minimise price risks. The headline August import figure also might be a distortion.
"The import figure for China are more volatile than the export figures to China so it is possible that real imports weren't that high. People could have been moving material from bonded stock, crossing customs over August because prices were lower and pay a lower level of VAT."
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