Iron ore exports from Brazil fell in May to their lowest level in 2009, amid persistent port congestion problems and surging inventories of the steelmaking ingredient in its biggest overseas market, China.
Brazil, the third biggest iron ore exporter to China after Australia and India and also home to the world's top iron ore miner Vale, said on Monday its May iron ore exports fell to 15.3 million tonnes, down 35 percent from April and 56 percent from a year ago.
It was the first monthly decline since February and comes as China, where Brazil sells around half of its iron ore exports, struggles with severe port congestion problems following record imports of iron ore for a third consecutive month in April.
"Heavy rains in the north of Brazil and port congestion in China could have had a negative impact on Brazilian iron ore exports, but the main reason...is likely lower iron ore demand from China due to high steel and iron ore inventories," Goldman Sachs analyst Marcelo Aguiar said in a note.
Iron ore stocks at China's major ports rose to 75.5 million tonnes in May and its two largest iron ore ports, based in the eastern province of Shandong, held close to their maximum stock capacities.
The increased imports were attributed to tumbling iron ore prices and cheap freight costs, making most of China's high-cost domestic iron ore output less competitive.
Roughly half of China's iron ore mines may have shut down since prices dropped, opening the door for low-cost producers to expand their market share in the world's biggest steelmaking country, an executive at global miner Rio Tinto said in late May.
However, some analysts and traders expect record imports would taper off in the coming months, as soaring freight costs have made imports expensive and as China seeks to rein in steel production.
China, which has overcapacity of more than 100 million tonnes and made 170 million tonnes of crude steel between January and April, has said it would reduce output by 8 percent to 460 million tonnes this year, implying it has to cut output by more than 10 percent in the remaining months of 2009.
Global miners are depending on China to make up for losses elsewhere as steel production crumbled in the wake of a deep economic slowdown since late last year.
Source: Reuters
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