China to raise Tianjin iron ore warehouse fees
China will raise warehouse fees for imported iron ore from June 1 at Tianjin, a major port in north China, a port document said, as the government moves to cut iron ore stockpiles that are clogging Chinese ports.
Stockpiles of imported iron ore at Chinese ports have hit an all-time high of nearly 80 million tonnes, while the high volume of imports has boosted freight rates and spot ore prices, putting Chinese users at a disadvantage in price talks with Australian miners.
Beijing has called on major steel mills in China to clear out their holdings in port warehouses, which traders believe account for two-thirds of the total stocks and have been built up in part due to cheap warehouse fees.
Iron ore stockpiles that have been stored in warehouses in the Tianjin port for more than 90 days will be charged 0.4 yuan ($0.0576) per tonne per day, according to the port document obtained by Reuters on Friday.
Stocks in storage for more than 60 days will be charged 0.2 yuan per tonne per day while those exceeding 30 days will be charged 0.1 yuan, the document said. Storage during the first 30 days remains free of charge.
Iron ore inventories of more than 30 days are charged 0.1 yuan per tonne per day in some major ports, but there are no time limits or progressive fee increases. Trading sources said domestic spot iron ore prices may ease if as much as half of the port stocks were moved, but they did not expect a major impact as a large chunk of the port stocks was of a low grade.
"They may liquidate the stocks, putting downward pressure on the spot price," said a senior iron ore trader based in Beijing, "Costs for holding on to the stocks will increase, while with the government moves, spot prices are unlikely to go up."
Trade sources said some traders had started to sell their stocks at a lower prices than they offered weeks ago, while two major steel mills have moved some of the stockpiles out of the port warehouses.
China's government has ordered that the country's ports be cleared of excess iron ore stocks, which have congested ports and boosted freight rates, although it indicated no time frame for implementing the move, a senior official said.
The directive would call for steel mills to transport iron ore from ports as soon as possible and for trading houses to confirm the destination of ore at ports, while implementing appropriate increases in port fees, National Development and Reform Commission Deputy Director Xiong Bilin said on the sidelines of a conference on Thursday.
However, many Chinese steel mills have failed to expand their stocking yards for iron ore in line with their increases in production capacity, partly due to cheaper costs at port warehouses.
Transportation bottlenecks, including a shortage of trucks and rail transport, have worsened the situation.
China's appetite for iron ore, which is fed into blast furnaces and processed into pig iron, has been growing sharply with the aggressive expansion in the country's steel industry, the world's largest.
Chinese steel mills are still locked in talks with Australian miners Rio Tinto Ltd/Plc and BHP Billiton Ltd/Plc on prices for 2008 term supply contracts.
Brazilian miner Vale , the world's top iron ore producer, has already agreed on a price hike of 65 to 71 percent for 2008, but Rio Tinto and BHP are holding out for a freight premium to reflect lower shipping costs from Australia.
Stockpiles of imported iron ore at Chinese ports have hit an all-time high of nearly 80 million tonnes, while the high volume of imports has boosted freight rates and spot ore prices, putting Chinese users at a disadvantage in price talks with Australian miners.
Beijing has called on major steel mills in China to clear out their holdings in port warehouses, which traders believe account for two-thirds of the total stocks and have been built up in part due to cheap warehouse fees.
Iron ore stockpiles that have been stored in warehouses in the Tianjin port for more than 90 days will be charged 0.4 yuan ($0.0576) per tonne per day, according to the port document obtained by Reuters on Friday.
Stocks in storage for more than 60 days will be charged 0.2 yuan per tonne per day while those exceeding 30 days will be charged 0.1 yuan, the document said. Storage during the first 30 days remains free of charge.
Iron ore inventories of more than 30 days are charged 0.1 yuan per tonne per day in some major ports, but there are no time limits or progressive fee increases. Trading sources said domestic spot iron ore prices may ease if as much as half of the port stocks were moved, but they did not expect a major impact as a large chunk of the port stocks was of a low grade.
"They may liquidate the stocks, putting downward pressure on the spot price," said a senior iron ore trader based in Beijing, "Costs for holding on to the stocks will increase, while with the government moves, spot prices are unlikely to go up."
Trade sources said some traders had started to sell their stocks at a lower prices than they offered weeks ago, while two major steel mills have moved some of the stockpiles out of the port warehouses.
China's government has ordered that the country's ports be cleared of excess iron ore stocks, which have congested ports and boosted freight rates, although it indicated no time frame for implementing the move, a senior official said.
The directive would call for steel mills to transport iron ore from ports as soon as possible and for trading houses to confirm the destination of ore at ports, while implementing appropriate increases in port fees, National Development and Reform Commission Deputy Director Xiong Bilin said on the sidelines of a conference on Thursday.
However, many Chinese steel mills have failed to expand their stocking yards for iron ore in line with their increases in production capacity, partly due to cheaper costs at port warehouses.
Transportation bottlenecks, including a shortage of trucks and rail transport, have worsened the situation.
China's appetite for iron ore, which is fed into blast furnaces and processed into pig iron, has been growing sharply with the aggressive expansion in the country's steel industry, the world's largest.
Chinese steel mills are still locked in talks with Australian miners Rio Tinto Ltd/Plc and BHP Billiton Ltd/Plc on prices for 2008 term supply contracts.
Brazilian miner Vale , the world's top iron ore producer, has already agreed on a price hike of 65 to 71 percent for 2008, but Rio Tinto and BHP are holding out for a freight premium to reflect lower shipping costs from Australia.