China's steel industry group has asked domestic mills and trading companies to control iron ore imports because excessive stockpiles held at ports are causing congestion.

Stockpiles of iron ore, used to make steel, stood at a record level of 79.22 million tons at domestic ports as of May 15, the China Iron and Steel Association said. This was up more than 50 percent from the start of the year.

The stockpiles have led to congestion in the northern ports of Qingdao, Rizhao, Tianjin and Lianyungang, according to the National Development and Reform Commission.

The steel industry association, funded by major mills, said ore imports during the first four months this year have far exceeded demand, and told its members to use up the port stockpiles and to better arrange imports based on needs.

"People rushed to import on expectation of higher prices," said a manager at a Shanghai-based steel trading firm. "Stockpiles would shoot higher without the industry association or the government intervening."

Importers shipped in more ore, as China's price talks with Australian ore suppliers BHP Billiton and Rio Tinto over annual term contracts were still deadlocked. Australia demanded freight premiums which could lead to higher prices.

CISA said cargoes arriving at the northern ports have to wait seven to 10 days to off-load iron ore.

"This not only caused big economic losses ... it also creates a false impression that China's ore demand is surging," it said.

(Shanghai Daily May 22, 2008)