Iron ore inventories drop as steel mills replenish holdings

Local output will drop 30 percent to 236 million tons this year, HSBC Holdings Plc said on Oct 22.

The stockpiles at Chinese ports were 13 percent above the five-year average of 89.04 million tons, according to Bloomberg calculations. The country produced 19 percent more crude steel in the first 11 months of last year than all of 2010, data by the World Steel Association show.

China's economy is likely to have expanded in 2014 at the slowest pace since 1990 as growth was constrained by a housing slump and factory-gate deflation. The world's second-largest economy, which cut interest rates in November, buys two-thirds of seaborne ore.

The government approved the acceleration of 300 projects this year as part of a broader 10 trillion yuan plan to run through 2016, according to industry sources. The investments will be across seven industries including oil-and-gas pipelines, transportation and mining, according to the people.

"Chinese end-user demand will remain pretty soft," said Ivan Szpakowski, an analyst at Citigroup in Hong Kong, during a Bloomberg Television interview.

"Over the course of the year, supply will be increasing very strongly. We see prices falling into the $50s."

Shipments from Brazil, the biggest exporter after Australia, rose 18 percent to 37.4 million tons in December from a year earlier, according to data on Monday. That is the highest level in at least nine years as Vale SA boosted output.