China's role in global iron trade is declining

Chinese imports of pig iron and other substitutes for scrap ferrous metals rose in May, the first sequential increase in half a year, but volumes remained at their lowest levels at the end of 2019.

According to Chinese customs, aggregate imports of basic pig iron (BPI), direct reduced iron (DRI) and hot briquetted iron (HBI) in May rose 15% to 314,398 tons (t) compared to April. This was the first monthly increase in volumes in China since November 2020, but it follows the 20-month low set in April. Imports of all three metals were down 41 percent from 535,962 tonnes recorded in May 2020.

China's imports in January-May amounted to 2.2 million tons, which is 17% less than in the same period in 2020.

The world's largest steelmaker significantly increased its consumption of pig iron for much of 2020, setting record imports of 9 million tonnes per year and surpassing the United States as the largest consumer of marine products for the first time since 2009.

But this trend faded for several months, as a combination of factors significantly reduced the economic viability of imports relative to domestic production.

High transport costs have significantly reduced the margins for importers of not only metal metals, but also ferrous scrap. Argus estimates that freight rates for vessels of 50,000–70,000 tonnes from the Black Sea to New Orleans on June 18 more than doubled to $ 41.50 per tonne. Chinese buyers pay on average about $ 10-15 per tonne from the Black Sea with the same or slightly wider spread when buying from Brazil. One supplier pointed to a freight difference of $ 50 per tonne offering to US consumers versus China.

Many suppliers also noted that the lack of uniformity in Chinese appetites made them less prone to small to medium sales and more interested in one-off sales in excess of 50,000-70,000 tonnes, while US buyers regularly bid 30,000-50,000 tonnes.