China's 2023 iron ore output seen higher as new projects come online: analyst

China's iron ore output in 2023 is expected to rise 3.5% from the previous year to 238 million mt as miners commission new production capacity, an analyst with investment bank Orient Securities said Nov. 29, in a development that could help slightly cut back the country's huge iron ore purchases in the longer term.

Miners faced challenges during 2021-2022 as new projects got delayed due to the pandemic and on strict mining safety measures that capped Chinese iron ore output growth, according to the analyst.

The upcoming commissioning of some domestic iron ore projects could add 8 million-10 million mt of iron ore output in 2023, the analyst added.

China's heavy reliance on iron ore imports in the near term would continue, but future dependence could gradually become less as domestic capacity rises and usage of steel scrap increases, analysts said.

China's iron ore imports are expected to fall by 2% in 2022 to 1.102 billion mt before dropping another 1.4% in 2023 to 1.087 billion mt, according to S&P Global Commodity Insights.

China imports around 1 billion mt of the steelmaking metal for its behemoth industry, with most of the shipments coming from Australia followed by Brazil.

During January-October, China's iron imports from Australia reached 604.93 million mt, accounting for 66% of the total imports, S&P Global data showed.

Metallurgical Mines' Association of China, or MMAC, said China's reliance on imported iron ore would dip to around 71% by 2025, led by higher steel scrap usage.

Back in 2016-2020, China's dependence on iron ore imports remained more that 80% for five consecutive years, according to data from the China Iron & Steel Industry Association.

The MMAC estimated steel scrap usage to reach 330 million mt by 2025, while domestic iron ore concentrates output would reach 350 million mt, requiring China to import around 880 million mt of iron ore concentrates by 2025.

Current stock situation

Latest data indicated iron ore stocks remained at comfortable levels but were comparatively lower from the year-ago period.

Led by weak interest from a Chinese steel sector that is in the midst of output cuts, iron ore surplus in the country is expected to reach the peak level in November, according to consultancy Nanhua Futures.

Chinese iron ore demand in December is seen at 110.27 million mt, lower than the November demand of 115.65 million mt, Nanhua Futures said.

As of Nov. 25, China's iron ore stocks at key ports were 134.8 million mt, up 1.2% week on week, latest data from Bank of East Asia's research arm East Asia Futures showed. However, inventories were down 12% year on year.

Iron ore stocks for trade were 80.6 million mt, up 2% week on week, but 12% down year on year.

Stocks at key steel plants reached 90.98 million mt, up 0.34% week on week, with inventories enough to last for 33 days, EAF data showed.

In December, China's iron ore sector is expected to have a surplus of 6.24 million mt, narrowing from the surplus of 9.73 million mt in November, Nanhua Futures said.