UPDATE 2-China April iron ore imports at record; steel slumps

* China's April iron ore imports soar to record high

* China's April steel exports fall to lowest in 4-½ years

* here

* here
(Recasts, adds comments; writes through)

By Alfred Cang and Tom Miles

SHANGHAI/BEIJING, May 12 (Reuters) - China imported record
amounts of iron ore in April and was also a net steel importer
for the second month running, as the industry grappled with
falling domestic ore output and slumping steel exports.

China imported a record 57 million tonnes of iron ore in
April, an all-time high, up 9 percent from a month ago and 33
percent greater than last April, the General Administration of
Customs said on Tuesday.

Customs data also showed China was a net importer of nearly
900,000 tonnes of crude steel, marking the second month running
that inflows have exceeded outflows for the country, which had
been a net steel exporter since 2005.

"All of them are surprising figures. The figures show that
oversupply is very likely to worsen in May and June," said a
senior trading executive in a state-owned steel mill, who asked
not to be identified as he was not authorised to speak to the
media.

"Domestic steel prices will not hold at the current level
for a long time," he added.

Steel product imports, at 1.62 million tonnes, exceeded
exports of 1.41 million tonnes, which were the lowest since
October 2004.

Traders said relatively high steel prices in China have
encouraged eastern European mills to ship products to China.

"The volume of steel imports was similar to monthly levels
in previous years, but we noticed that China imported more
low-value-added steel products from eastern European mills this
year, suggesting production costs there are much cheaper," said
Du Wei, an analyst for consultancy, Umetal.com.

Record iron ore imports reflected slowing domestic output
due to the high cost of production compared with mines in
places like Australia, Brazil and India, and that hunger for
foreign ore is also feeding into freight rates.

The Baltic Exchange's main sea freight index .BADI, which
tracks rates to ship dry bulk commodities, was at 2,215 points
on Tuesday, higher by 0.05 percent from a day ago, and near its
highest for the year so far -- a peak of 2,298 points was hit
in March. [ID:nLB720607].

"The massive imports reflected in the rising seaborne
freight index in the past months, and that trend could continue
in May and June as we do not expect a rapid fall in Chinese
iron ore imports in the near future," Du said.

Indeed, Indian iron ore prices have risen in the past few
days, lifted by Chinese buyers who are looking to save money on
rising freight costs by booking material from nearby suppliers.

A large miner-cum-exporter in east India said deals were
done on Friday for ores with 63.5 percent iron content at $66.5
and $67 with freight, up from $66.1 earlier last week.
[ID:nBOM404836]

"Since Thursday, demand has increased," the exporter said.

Iron ore stockpiles at Chinese ports edged up only 2
million tonnes in April, according to data from Chinica
Shipbrokers Ltd [ID:nSHA48456], implying that about 55 million
tonnes of imported ore found its way to mills and markets in
April.

"This means China's demand for imported iron ore is solid
and sustainable. I expect China's iron ore imports this year
could rise from last year," said analyst Henry Liu at Macquarie
Bank.

"It seems that talks about imported ore substituting
domestic-produced are real," he said.

Those 55 million tonnes of high-grade imported iron ore
translate into pig iron production of around 34 million tonnes,
or more than 80 percent of expected average monthly production
of around 42 million tonnes in China.

The record imports will be seized on as leverage by both
sides in annual benchmark iron ore price talks between China's
top mill, Baosteel (600019.SS) and the top miners, BHP Billiton
(BHP.AX)(BLT.L), Rio Tinto (RIO.AX)(RIO.L) and Vale (VALE5.SA).

Chinese steelmakers have been pushing for a 40 percent
price cut in this year's talks and an industry group executive
told Reuters Chinese steel mills were not able to afford high
ore prices due to their weak profits. [ID:nSHA148307]

Chinese iron and steel sector's imports and exports in
April and the first four months of 2009:

April Jan-April

mln tonnes mln tonnes pct chg*
Exports:
Steel products 1.41 6.55 -59.5
Steel billet 0 0 -97.7
Coke 0.02 0.18 -95.9
Imports:
Steel products 1.62 4.85 -14.7
Steel billet 0.67 1.57 -
Iron ore 57.00 188.46 22.9
* Year-on-year
- not available
* Percentage change on year earlier.
Source: China General Administration of Customs.
(Editing by Nick Trevethan and Sambit Mohanty)