Clearly the ore leaving the ports is heading to the steel mills. But the last Mysteel survey of 14 May did not show bulging stocks at mills. Instead, the mills continued to display the lean inventories they have held so far this year. Ore consumption has picked up with steel production since March, but it seems mills continue to operate with little raw material coverage.

——If hefty demand is not the cause of falling port stocks, then we have to suspect supply is lagging, and ports are not being refilled fast enough.

——Statistics for April suggest imports have rolled over and not increased since early 2014 (Figure 5). Australia has climbed, but Brazil and South Africa have been flat and ROW fell. This is the supply response expected from low prices.

——And the other part of the supply response has been from China’s domestic mines where mines have closed and production fallen.

——So if we smooth away the jagged monthly variability, it becomes evident that total iron ore supply in China peaked in September-14 and has subsequently eased by over 100Mtpa (Figure 7). Meanwhile iron ore demand, while not displaying the sharp increases of previous years, has lifted in the current peak demand season. So in 2Q, iron ore demand is exceeding supply.