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GRAPHIC-China's iron ore stocks could make enough cars to reach the moon

Kitco News

* Iron ore at China's ports at a record 154.4 mln tonnes

* Could supply enough steel for 107 mln cars

* China's steel demand may slow after last year's rally

By Manolo Serapio Jr

MANILA, Jan 22 (Reuters) - Record stockpiles of iron ore at China's ports could produce steel for 107 million cars -- more than three times the country's annual auto sales, or enough to reach the moon if lined up nose to tail.

And with China's steel market showing signs of fatigue after last year's rally, the country's over 150 million-tonne iron ore mountain poses a threat to prices, traders and analysts said.

Driven by resilient steel demand and a crackdown on pollution, the volume of imported iron ore at China's major ports hit 154.43 million tonnes on Jan. 19, up nearly 30 percent over 12 months and the most since 2004 when consultancy SteelHome began tracking the data. That's enough for 97 million tonnes of steel, which could produce 107 million cars. Lined up, they would span more than 480,000 kms (298,000 miles).

"There's so much iron ore at the ports and this will push down prices," said a Shanghai-based iron ore trader. "If the volume continues to build, traders will be forced to sell cheaply."

About 37 percent of the port inventory belongs to traders and the rest is owned by mills, SteelHome said. Both groups ramped up iron ore imports throughout 2017 as domestic steel prices surged nearly 50 percent, driven in part by tough curbs on production to help fight smog.

The pollution crackdown also boosted demand for better quality imported ore, mainly from Australia and Brazil, which can produce more steel for fewer harmful emissions.

Despite the big rise in port inventory, spot iron ore prices eased only around 8 percent over the course of 2017.

But with steel production restrictions expected to be lifted by March as the winter curbs end, and China's steel demand forecast to slow in 2018, prices look set to weaken further, analysts said.

Barclays estimates China's annual steel production will fall from last year's record 831.7 million tonnes to 820 million tonnes, citing a slowing property sector and a shift to a "quality" over "quantity" economy.

Shanghai steel futures are down 4 percent from a three-month high reached in December.

Iron ore imports also surged to a record 1.075 billion tonnes in 2017, with top suppliers Australia and Brazil shipping more than 80 percent of total, although exports from Iran and India jumped by double-digits.

Traders said much of the material in port stockpiles is unwanted lower-quality ore.

"Clearly, when China's mills begin to switch to lower quality feedstuff, there is no shortage of immediately available material," Barclays said.

Iron ore stood at $76.75 a tonne on Friday, down 3 percent from a 4-1/2-month peak hit in early January.

Barclays expects the raw material to average $50 a tonne in the second quarter, and $60 for the year, while Julius Baer analyst Carsten Menke sees it averaging $50 in the second half of 2018.

Stockpiles have risen to such levels that some ports are trying to push the buyers to remove their cargoes, but are having difficulties during winter, said the Shanghai trader.

"When the temperature is low some stocks will be frozen and would harden, so it would be difficult for owners to transport the cargo," he said.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Record port stocks, weakening steel product prices, pose threat to iron ore market China's top 5 iron ore suppliers China's imports of iron ore by top 5 suppliers ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Manolo Serapio Jr.; editing by Richard Pullin)

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