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Saturday, October 8, 2011

Chinese see softening in iron ore and steel prices on opening

Saturday, 08 Oct 2011

It is reported that the Chinese steel mills that have been holding up the Australian economy are under pressure with steel prices falling and iron ore prices expected to follow.

Mr Yin Jimei an analyst at Iron & Steel Information Website in Tangshan said the steel and iron ore markets are bracing for volatility on a declining trend.

Mr Xu Xiangchun at Mysteel in Shanghai said market anxieties over the global economy have coincided with softening domestic demand including a decline in railway construction due to a series of scandals in the Ministry of Railways.

He said that "Capacity utilisation is on a downward trend because demand and prices are falling and prices for raw materials are high.”

Mr Xu Lejiang Baosteel chairman said last week that steel was the least profitable sector in Chinese manufacturing, with margins less than 3%. He said that ''Steel mills are restructuring and it is possible that we'll see steel mill bankruptcies in the near future. Iron ore prices are likely to fall.''

Dragonomics a Beijing consultancy said real estate data was now a better guide to activity than construction data. It said ''Some questions arise from the apparent disparity between the reported volume of floor space under construction which is up by 30% this year and property sales, which are up only 13%. The sharp rise in new construction is likely a mirage.''

Investors are hoping that a social housing program will offset a slowdown in the private sector real estate market.

(sourced from smh)

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