Earlier this year, iron ore prices were in rapid retreat, thanks to a combination of weak demand, still-high stocks of iron ore (at least at Chinese ports), and rising iron ore import volumes (especially from Australia).
Indeed, on a year-on-year basis, real demand for iron ore in China, in the form of pig iron production, fell by 2.5% during the first four months of 2015, according to official estimates from the country’s National Bureau of Statistics (NBS).
Over the same period, however, iron ore import volumes rose, albeit by only 0.7% overall. This was driven by substantial increases in Australian supply, which offset erosion from almost everywhere else except Brazil.
As expected, rising Australian supply volumes have come at the expense of domestic material within China, with Chinese production of iron ore falling by 11.8% on a run-of-mine basis.
The steady erosion in domestic production began to affect inventories in China from the end...