Despite weakening demand for iron ore from steel makers on slowing economy and construction works, and very week demand for cotton as the textile industry suffer, China continues to import massive amount of iron ore and cotton.
At a port in Qingdao, China Securities Journal reports that despite imported iron ore sitting at the port idle for extended period of time, new imported iron ore never stops coming into the port of Qingdao, with two carriers of iron ore arriving at the port almost on a daily basis despite that there is clearly very few orders from steelmakers. The very weak demand for iron ore is manifested by the very weak iron ore prices, which are almost crashing.
The chart below shows the iron ore total ports inventory. Since the second half of last year, inventory has reached elevated level and is now remaining so.
Meanwhile, one may remember that we have briefly mentioned the rising cotton inventory at ports. Bloomberg reported last week that China‘s cotton consumption may shrink 11%, according to a forecast by Zhang Hongxia, chairwoman of Weiqiao Textile, the largest cotton-textile maker in China:
Cotton usage may drop to 8 million metric tons this year, compared with consumption of about 9 million tons in 2011, according to Zhang, who had forecast in March that 2012 demand may increase to as much as 9.5 million tons. China accounts for about 40 per cent of global cotton consumption.
Weiqiao, which normally consumes about 600,000 tons of cotton a year, used 204,000 tons in the first half as capacity usage was reduced to cope with weaker demand and high inventory, Zhang said. Net income at the Zouping county, Shandong-based company fell about 90 per cent in the first half.
Despite weak demand, cotton imports did not stop as international prices were lower than domestic prices, encouraging some traders taking this opportunity to perform arbitrage. As a result, cotton inventory at some ports like Qingdao has already reached its maximum capacity according to Chinese Securities Journal, but traders are not stopping.
Finally, coal inventory at ports have come off the highs from earlier this year, but this is no sign of recovering demand. Part of the reason why inventory has come down at Qinhuangdao, on top of active destocking, is that new port facility at Caofeidian has come into service according to China Securities Journal, so there is, unfortunately, very little to feel cheerful about. The chart below shows the thermal coal inventory at Qinhuangdao and Tianjin. As you can see, inventory at Qinhuangdao has come off the high noticeably.
This article originally appeared here: Iron ore and cotton inventories at Chinese ports remain at elevated levels
Also sprach Analyst – World & China Economy, Global Finance, Real Estate
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