Chinese iron ore destocking could take months - FMG

Thu, 27 Oct2011

Reuters quoted Australian miner Fortescue Metals Group said global iron ore prices down nearly 30% since early September could take months to recover as Chinese steel mills work off inventories.

Mr Nev Power Fortescue CEO told a media conference that "We are seeing some short term volatility because the steel mills are destocking in China. It has been a little more hand to mouth than what it has been."

Mr Power said “Fortescue held all its long term contracts in place and that those sales were going through. It's really the shorter term sales that are being shifted around and changed."

Mr Power when asked how long Chinese steel mills would continue to draw on existing inventories of iron ore said that "Probably a matter of weeks, maybe stretching to a couple of months."

He said weakening Chinese steel prices is contributing to reluctance by mills to immediately replenish stockpiles of iron ore.

He added that the steel prices have come down in China particularly the rebar price and that is causing some pain with the steel mills."

Mr Power said "We see continued strong growth, and that is going to be driven by the continued urbanization of central and western Chinese provinces, which are largely undeveloped and lack infrastructure at this stage."

(Sourced from Reuters)