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MANILA, March 31 (Reuters) - With enough iron ore to construct Paris's Eiffel Tower nearly 13,000 times over, China's ports are bursting with stockpiles of the raw material and some of them are demolishing old buildings to create more storage space, trading sources said.
China's domestic iron ore production jumped 15.3 percent in January-February as a price rally last year extended into 2017, causing imported ore to pile up at the ports of the world's top buyer. Stockpiles are at their highest in more than a decade and are affecting prices.
Inventory of imported iron ore at 46 Chinese ports reached 132.45 million tonnes on March 24, SteelHome consultancy said, the highest since it began tracking the data in 2004. A third of the stocks belongs to traders and the rest is owned by China's steel mills, SteelHome said. SH-TOT-IRONINV
That volume would make about 95 million tonnes of steel, enough to build 12,960 replicas of the 324-metre (1,063-foot) high Eiffel Tower in Paris.
Global iron ore prices are now at just above $80 a tonne from a 30-month peak of $94.86 reached in February, largely due to the growing port inventory.
Prices surged 81 percent last year .IO62-CNO=MB, bringing relief to miners after a three-year rout. The rally stretched into 2017, inspiring marginal producers to resume business and lifting supply as China's steel demand waned.
Further falls in the price of iron ore risk shuttering Chinese capacity again. That could boost China's reliance on top-grade exporters Vale, Rio Tinto and BHP Billiton.
Some ports, trying to manage their storage space, have in recent weeks rejected vessels carrying lower grade iron ore that is less preferred than higher quality material and could take months to clear, said a source at a foreign trading firm that has millions of tonnes of the steelmaking ingredient at Chinese ports.
"We have sent our people around the major ports in China and some are trying to find extra space. They're demolishing some abandoned buildings to create more space," said the source, who declined to be named because he is not permitted to discuss the matter publicly.
If iron ore stocks continue rising "we're going to reach maximum physical capacity at all ports in China by early June, said the source. "We saw some ports rejecting low-grade shipments which are very difficult to liquidate."
Including another 40 million tonnes of iron ore at China's steel mills "that's too much of stock," said Li Xinchuang, vice chairman at China Iron and Steel Association.
"It will be very dangerous for the price. That's what's very worrying about it," Li told Reuters at an industry conference on Thursday. Li said most of the stocks in ports were high quality iron ore despite perceptions in the market that the bulk of it was low-grade.
But officials at key Chinese ports for iron ore imports - Rizhao, Tangshan and Caofeidian - said they have enough storage capacity to take in more cargoes and that they were not turning away any shipments.
An official at Jingtang port in Tangshan said there are 15 million tonnes of iron ore stocked there currently, not far from its capacity of 20 million tonnes. The port in Qingdao, also a major destination for iron ore shipments, did not respond to a request for comment.
Australian miner Fortescue Metals Group, the world's No. 4 iron ore supplier which ships lower grade material mainly to China, said its deliveries to the country are "continuing as normal."
"While port stocks overall are at relatively high levels, Fortescue's share of those stocks aligns with our market share of imported ore into China," Fortescue CEO Nev Power said by email in response to a Reuters query.
Chinese ports can refuse discharge of some shipments and it's up to the importer to find another port but costs due to delays would be borne by the importer, said a shipping manager for a Chinese trading firm.
Still, slow demand could swell port stocks further as more shipments tied to Chinese mills' long-term contracts with miners arrive and traders scour the market for clients.
"We have a fleet of vessels on their way to China with no buyers. We're trying to find buyers," said the foreign trading source.
Reporting by Manolo Serapio Jr.; Additional reporting by Aaron Bunch in Perth and Beijing Newsroom; Editing by Raju Gopalakrishnan