I'm not so worried about the stockpile. A very large number of mills use port stockpiles as their primary IO inventory storage area as they have so little space at their mill sites (from Steelhome: "The iron ore prices failed to rise in the absence of 8 percent drop in port stocks after six consecutive declines till December 31, probably because about
70 percent
of port stocks belong to mills, who heavily rely on port stocks and are not interested in replenishments.)
. This is one aspect of the industry that commentators have got consistently wrong. If you look at total iron making capacity to the size of the port stockpiles you would see that the inventory is quite low - typically 3 week's production's worth.
Historically, the port stockpiles totalled around 70 -80 Mt. That increased dramatically to 90 - 120 Mt when China loosened its IO import licencing rules and allowed more "third party" traders to trade. There is a double whammy, then: the mills are not interested in any major stockpile replenishment until after the CNY. On top of that, traders are worried about the direction of the IO price and do not want to be left with distressed stock.
In the medium term, the market will see a rally in the IO price post CNY. Whether that rally is meaningful and sustained only time will tell.
