Poor and not so poor news for iron ore and resource companies in the steelmaking materials businesses.
(That means BHP Billiton, Rio Tinto and the like.)
Crude steel output in China, the world’s biggest producer, fell to the lowest level in 14 months in November, as a slowing economy cut demand and prices.
Output fell 49.9 million tonnes last month, according to the government, 8.8% down on the 54.7 million tonnes in October and the lowest since September of last year.
Production fell 0.2% from November of last year, which was the first year on year dip for more than two years.
Domestic iron-ore production rose 35% to 126.4 million tonnes in November and that pushed output for the first 11 months of the year to 1.2 billion tonnes.
Despite the dip in production, China’s steel mills boosted imports of iron ore by 28.6% in November to a 10 month high of 64.2 million tonnes.
That pushed imports for the first 11 months of the year up 11% to 620 million tonnes.
That increase was put down to stock rebuilding ahead of the Chinese winter and the New Year holidays at the end of January.
But global spot prices fell sharply in October, despite the stronger Chinese demand.
Iron ore prices started falling in September hit a low in October of around $US117 and have recovered tentatively to about $US140 a tonne.
Analysts say the Chinese mills stepped up their purchases of higher quality ore from Australia and Brazil to take advantage of that slump in world prices.
So after moaning for months about the high prices and gradually winding back import purchases, the mills swooped after the price plunge to rebuild stocks at lower prices.
It has been doing the same in copper now for the last six months and boosted oil imports in November after prices dipped under $US100 a barrel and production stopped from a key offshore oilfield after a leak.
The key will be what it does this month. If previous practice is followed, imports should again be high because of the need to maintain stocks through the winter and New Year periods.
Imports fall in January and February for the same reasons.
With Australian exports to China weakening, BBHP and Rio will battle to produce the big gains in earnings that some in the market see when they report their interim (BHP) and full year profit figures (Rio) early next year.
Rio’s second half profits will come under pressure. Earnings for the first half of 2012 will also be questioned as a result of the weaknesses now showing up.
