More on Chinese iron ore output

From Reuters:

Australian exports have risen to account for more than 60 percent of China’s total draw from the rest of the world in the past couple of months…That’s displacement of higher-cost supply with lower-cost supply in action.

The biggest displacement, based on where production sits on the global cost curve, should take place in China itself.

…Yet the official figures from the National Bureau of Statistics (NBS) suggest the opposite. Those for July showed iron ore production up 11 percent year-on-year with cumulative year-to-date growth running at 9 percent.

This may in part be down to the fact that the NBS releases only crude production numbers. Missing, critically, is any information on grade.

But in part it may just be down to the fact the figures are wrong…Macquarie back-calculates Chinese supply from the country’s production of pig iron, adjusted to reflect imports and cross-checked against regular surveys by local information providers such as Mysteel.

…Macquarie’s verdict: “so far, so efficient for iron ore in 2014, with the cost curve proving itself once more”.

With steel mills still running at near record output, where’s the price stability then? I remain comfortable with the view that Chinese iron ore production will prove much more sticky than Macquarie and the sell side generally reckon upon.