Iron ore stockpiles at China's ports expand to highest since '14

[SINGAPORE] Iron ore stockpiles held at China's ports have expanded to the highest level since 2014, signaling increased supplies available to steelmakers in the world's biggest user even as prices surge.

Inventories climbed 0.9 per cent to 106.75 million metric tons last week, the highest since November 2014, according to data from Shanghai Steelhome Information Technology Co. The holdings are up 15 per cent this year.

While the buildup adds to evidence of robust supply and follows predictions that iron ore is poised to decline, prices have climbed in recent weeks. Benchmark spot ore tracked by Metal Bulletin Ltd has surged to the highest level since April as a rally in coking coal spurs gains in related raw materials.

Ore with 62 per cent content rose 1.5 per cent to US$63.96 a dry ton on Friday, according to Metal Bulletin. Prices have advanced 47 per cent in 2016 after being routed in the past three years, when miners including BHP Billiton Ltd and Rio Tinto Group boosted output amid a slowdown in China.

There are competing views on where prices will go next. Morgan Stanley has said the commodity's outlook in the fourth quarter is deteriorating as holdings expand, while UBS Group AG warned the period from November may mark a "death knell" for prices.

Still, Toronto-Dominion Bank has said although more supply is coming, demand in China may be supported as the government adds stimulus. The lender, which placed first in the latest Bloomberg ranking for forecasting iron ore, sees prices at about US$55 this quarter.

BLOOMBERG