By looking at blast furnace iron, as it considers only iron made with coking coal and iron ore, the research division of the investment bank calculated that pig iron production alone required 24.1 million tonnes of destocking in iron ore and 10.6Mt destocking in coking coal per month from peak production levels in June.

Macquarie made assumptions that the target level of stocks used was typically around 30 days of usage and that one tonne of blast furnace iron required 1.6 tonnes of iron ore and 700kg of coking coal, which it considered conservative.

“Broadly, World Steel Association figures suggest the rate of use of iron ore has fallen by 24.4 million tonnes per month from its peak in July,” Macquarie said in its written analysis.

“The demand for coking coal has fallen by 10.7 million tonnes per month from its peak in July.”

The bank added that the key seaborne export markets for iron ore of China, Japan, Taiwan and western Europe had a rate of use falling by an annualised 222Mt while stock requirements had dropped 18.2Mt as of October.

For coking coal, Macquarie noted the key export markets of Taiwan, India, Brazil and western Europe had a dive in the rate of use by an annualised 8Mt per month while stock requirements sank 700,000t.

“In coking coal, the actual calculations are more complicated because many steelmakers in Europe and Asia import coke from China and eastern Europe made with coking coal, which is not part of the seaborne market,” Macquarie said.

“The first reduction in carbon requirements is to reduce these tonnages, hence the loss of demand from the seaborne coking coal market is somewhat less.

“However, note that these calculations are through to October and that we expect further major cuts in western European iron production to take place in November and December (since the cuts have barely begun in western Europe in October).”

Macquarie also said the combination of required destocking and the lower level of absolute demand prompted an “unprecedented volume of raw material shipment deferrals in recent months leading to a collapse in ocean-going freight rates following major cancellations of ships”

“So far, we estimate well over 100 million tonnes of iron ore supply has been withdrawn from the market (70 million tonnes reduction in fourth-quarter seaborne shipments and also reductions in Chinese, Russian and Ukrainian production),” said Macquarie.

“In coking coal, large cuts are reported in China and smaller cuts in Russia. So far there have been no significant cuts announced from Australia, the USA and Canada, the major coking coal suppliers, apart from Teck Coal’s guidance of actual shipments at the lower end of previous guidance.”

The WSA revealed that world blast iron production in October was 183Mt lower in per annum terms from June while world coking coal use dropped 128Mtpa, or 17.95%, in the same period to 585Mtpa.