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Levels hit 110.65 million tonnes on Friday, up 2% from a week earlier, based on data released by Mysteel.
As volumes rose, prices tumbled, dropping from more than 820 yuan ($133.4) per tonne on March 3 to 745 yuan ($121.2) per tonne on March 11, according to Metal Bulletin’s China iron ore port stock index.
Prices made a slight recovery towards the end of the week, rising to 759 yuan ($123.5) on March 14.
Market participants attributed the volume increase to a rise in imports during the first two months of the year.
"China’s iron ore imports jumped 21% in January-February, while the country’s crude steel output only gained 1.7%, which partly explained why stockpiles at the ports rose,” a trader in Shanghai said.
Increased demand for import financing also helped drive up port stocks, sources said.
"There’s a chunk of ‘dead’ cargoes at the ports that could stay there for a long time. After prices for iron ore dropped, it was no longer viable for the importers to resell the material for cash,” a trader in Beijing said.
Iron ore prices at the ports, on a US dollar basis, are $5-6 per tonne lower compared with forward cargoes, the trader said, adding that despite the drop in prices, panic selling had not set in.
"Iron ore sales [at the ports] were not bad during first three months of this year. At least they are selling at a reasonable pace,” the trader added.
The drop in prices has seen some mills look to take advantage of growing arbitrage opportunities.
"Some steel mills actually sold some of their contracted iron ore, and purchased iron ore from the ports instead, due to the relatively lower prices,” a trader at a steel mill in Shandong province said.
"But some traders with cargoes in hand are not selling at current prices. They decided to hold on to the cargoes in anticipation of a price rebound,” he said."Mills are in a better position compared to traders.”
High interest rates have also led to iron ore increasingly being used as a form of collateral, as steel mills seek new financing methods.
"Steel mills can either consume the iron ore itself or buy cheaper material from the ports. Traders without port stocks are not likely to make purchases while those with stockpiles will find it difficult to sell,” a steel mill source in Hebei province said.
High port stock volumes have been highlighted as one of a number of reasons for the recent price crash in iron ore, which saw the steelmaking raw material’s price tumble to $103.99 per tonne on Monday March 10, from $118.06 a week earlier.
The default of privately-owned mill Haixin Steel in Shanxi province the previous week was one of the main drivers behind the price move.
Steel First reported on March 14 that the mill was looking for a bailout from the government of Shanxi province.
Iron ore stockpiles at Chinese ports hit record volumes of more than 110 million tonnes on Friday March 14, following a dramatic fall in the price of the steelmaking raw material.