* 'Pain' for global steelmakers from high iron ore prices
* Spot iron ore hits 6-1/2-year high as China steel mills ramp up
* Iron ore to ease by March as producers starting to raise output
By Yuka Obayashi and Ritsuko Shimizu
TOKYO, Aug 28 (Reuters) - China's strong steel demand and global supply fears amid Sino-Australian tension are pushing iron ore prices higher and hurting steelmakers' profits, but the market is likely to drop off towards March next year, a Nippon Steel executive said.
"The iron ore rally on the back of solid China demand is giving pains to steelmakers worldwide, except for Chinese mills, as the economy of the rest of the world is falling," Nippon Steel 5401.T Executive Vice President Katsuhiro Miyamoto told Reuters in an interview on Wednesday.
The world's third-biggest steelmaker in early August reported its biggest first-quarter loss since 2012. prices of 62% iron ore for delivery to northern China MT-IO-QIN62=ARG , as assessed by commodity price reporting agency Argus, rose to a 6-1/2-year high last week, as mills in the world's top metals producer and consumer continued to ramp up crude steel output. China's big appetite, some Chinese mills are boosting stocks due to floods in southern China, while congestion of iron ore carriers at Chinese ports, apparently due to worsening Sino-Australian relations, also added to pressure," Miyamoto said. between Australia and China has risen in recent months, particularly after Canberra called for an international inquiry into the origins of the coronavirus that causes COVID-19. Miyamoto expects iron ore prices to ease as producers are boosting output, although prices of coking coal, another ingredient for making steel, may rise as cyclone season approaches in Australia.
Coking coal prices SCAFc1 are now down more than 20% for the year.
The bright spot of China's swift economic recovery is that Nippon Steel's exports to China have risen more than anticipated, Miyamoto said.
Nippon Steel has temporarily idled about 30% of its furnace volume to cope with slumping demand amid the coronavirus pandemic, but activity at domestic automakers is rebounding stronger than anticipated, he said. base assumption is we continue to suspend those blast furnaces through March, but we'll take flexible actions if demand picks up faster," he said.