CISA: China's Iron Ore Prices to Stay Low

Monday, 06 February 2012

China Iron and Steel Association predicts in its report this week that Chinese steel production will move slowly but steadily alone with rebounding demand; iron ore price is expected to run low due to hiking domestic iron ore output and sizable port inventories, although demand will rise in accordance with steel production.

In 2011, China 's iron ore import price averaged $ 163.84, up 28.13% year on year, based China Customs; In the meantime, Chinese-mined concentrates rose 15.06%, versus the rise of 10.13% in CISA's China Steel Price Index (CSPI); Large and medium sized steel markers in China posted falling profit to 87.53 billion yuan and declining margin to 2.42% in the year, based on CISA. Apparently iron ore price is still high compared to the persistent weakness in steel market.
In January 2012, Chinese steel market was confined by demand and credit, leading to downtrend in construction, cold rolled coil and strip and stagnancy in hot rolled coil, plate, section and special steels, said CISA.

The market saw no loosening in government policies and credit pressure for real economies remained in place. Before Chinese new year festival, steel mills and trading companies faced heavy pressure from loans; previous active winter restocking and other supportive forces didn't come up this year; liquidating intention was strong on bearish prospect due to falling economic growth in the first quarter and concern about property market regulation.

Although expectation of loosening monetary policy is getting strong, rehearsal of prudent monetary policy in 2012 from China ' s central bank seems a denial to a reverse later on. Key steel consuming industries, including property, railway, machinery, auto, are slowing down; post-festival demand is expected to be low for a relatively long time; drops in raw material prices would be limited; mills will face heavy cost pressure; Steel inventories, particularly of construction steel are rising noticeably.

For a long time, post festival, Chinese steel market will be facing slow demand recovery, rising inventories and low steel prices.
Source: Steel Home

China 2011 steel output likely 683 million tons

Thu, Jan. 5, 2012

-- China's crude steel production likely reached 683 million tons in 2011
-- Country's 2012 crude steel demand may rise 4% to reach 700 million tons
-- Severe challenges ahead for China's steel exports, association says

BEIJING (MarketWatch) -- China's total crude steel output likely rose 9.2% in 2011 to 683 million metric tons, the China Iron and Steel Association said in a statement Thursday.

Steel exports likely rose 16% to 49 million tons. China's 2012 crude steel demand may rise around 4% to 700 million tons, it said.

However, many steelmakers in China are facing serious financing and capital difficulties, and some will have to halt or delay projects due to capital stress, CISA said.

The National Bureau of Statistics is expected to release steel output data later this month.

China faces "severe challenges" this year on the export front, and international trade frictions may arise, CISA said.

The association projected downside for iron ore prices due to sluggish global demand. "Chinese steelmakers are facing meager profit margins or losses this year," it said.

Import prices for iron ore averaged $166.2/ton in the first 11 months, up 31.5%.

In the first 11 months, CISA's member-mills gained a combined profit of CNY85.3 billion, up 8.1% but their profit margin was only 2.55% during the period, the association said.

(sourced MarketWatch)

Iron Ore-Shanghai rebar ticks higher; output cuts weigh

Tue Nov 8, 2011

* China's Oct daily steel output at lowest since Jan
* Sixth day of gains for iron ore, but could lose steam (Updates rebar price)
By Manolo Serapio Jr

SINGAPORE, Nov 8 (Reuters) - Shanghai steel futures edged up on Tuesday, regaining ground after sliding over the past three months, but output cuts spurred by weaker steel demand in top producer and consumer China limited gains.

China's average daily crude steel output in October stood at 1.786 million tonnes, the lowest since January, data from the China Iron and Steel Association showed on Monday. That was down 5.5 percent from the 1.89 million tonnes daily average for September as mills scaled back production to cope with slower demand.

More steel mills are expected to cut production and prices towards the end of the year to curb losses, likely taking the steam out of raw material iron ore, which gained for a sixth straight day on Monday after sliding more than 30 percent last month.

The most-active May rebar contract on the Shanghai Futures Exchange closed up 0.9 percent at 4,141 yuan a tonne. Rebar lost more than 16 percent over the three months from August to October.

Iron ore with 62 percent iron content climbed 1.7 percent to $125 a tonne on Monday, according to the Steel Index .IO62-CNI=SI, the highest since Oct. 26.

Iron ore has gained 7 percent in the past six sessions, after shedding nearly 31 percent in all of October.

"There's some stability in the market across the board, but I don't think prices will go up very far," said a physical iron ore trader in Singapore, adding he sees $135 as the "upper limit" for iron ore.

Sellers upped price offers in China further on Tuesday by $1-$3 a tonne. Australian 61.5-percent grade Pilbara iron ore fines rose $2 to $127-$130 a tonne, and 63-grade Newman fines increased $3 to $130-$132, said Chinese consultancy Umetal.

Indian 63.5/63 fines rose $1 to $134-$136 a tonne, said Umetal. All prices include freight cost.

Most steel mills in China may be done with restocking ore since they don't need as much raw material given the output cuts and with credit access still tight, said an iron ore trader in the port city of Rizhao in China's eastern Shandong province.

"It's almost winter and demand for steel products is really bad during winter," he said.

Most construction activities in China either slow or stop during winter and this will restrain demand for steel, already slowed by tighter credit as Beijing makes fighting inflation its top priority.

Still, most iron ore traders are holding off cargoes, waiting for better prices to unload material some of which were purchased before the market's freefall in October.

"Some traders who got stuck at higher levels and are holding high inventories are holding back some cargoes hoping that the market will go up further," said the Singapore-based trader.

"But the problem is prices can easily fall back again. When steel futures drop, all this optimism will certainly disappear."

(sourced Reuters)

Iron Ore-Spot at 3-month top on brisk Chinese buying

Thu Aug 25, 2011

* High China steel output on brisk construction demand
* Chinese buying could wane if ore prices rise further
* Shanghai rebar slips to two-week low
By Manolo Serapio Jr

SINGAPORE, Aug 25 (Reuters) - Spot iron ore prices rose to their highest in more than three months and offers stayed firm on Thursday as Chinese mills restocked amid brisk steel demand.

Strong construction demand has been behind the rapid pace in China's daily steel production, which has averaged more than 1.9 million tonnes since late February, up from last year's 1.7 million tonnes.

But analysts and traders said the upturn in iron ore prices could lose steam if steel prices in China, the world's biggest consumer and producer, fall sharply.

"It looks like Chinese restocking is still underway, they still seem happy to buy iron ore. But they're probably at a point where they could pull out any minute," said Greme Train, commodity analyst at Macquarie in Shanghai.

"So if there's any negative news flow in the next couple of weeks, like weak PMI or another rate hike, then you could see a pullback in buying."

Two index-based spot prices hit their highest levels since mid-May, with 62-percent iron ore rising 0.3 percent to $180.25 a tonne on Wednesday, according to the Platts index IODBZ00-PLT. A similar grade at The Steel Index .IO62-CNI=SI rose 0.2 percent to $178.30.

Metal Bulletin's iron ore index .IO62-CNO=MB gained 0.3 percent to $178.31 a tonne, the highest since Aug. 4.

Offers for Indian 63.5/63 grade ore held at $187-$189 a tonne, cost and freight, on Thursday, said Chinese consultancy Umetal. Australian 62 percent Newman fines were quoted at $182-$184, it said.

Chinese buying appetite could wane if prices continue to rise, traders said.

"This bull run can't continue for too long. I see a price drop in September for sure," said a Shanghai-based iron ore trader.

A drop in Chinese steel futures to two-week lows on Thursday could prompt some mills to step back from buying the steelmaking ingredient.

The most-active January rebar contract on the Shanghai Futures Exchange fell as low as 4,788 yuan a tonne, before cutting losses to 4,806 yuan by 0317 GMT, down 0.3 percent.

But Macquarie's Train expects iron ore buying to intensify towards and into the fourth quarter when supply of domestic concentrates thins out as mining activity slows in winter.

"Risk reward is balanced at the moment in terms of where pricing can go from here, short-term, but at some point before the end of the year I think iron ore will probably be trading $10 higher than it is now."

(sourced Reuters)

China February daily steel output hits record high

Fri Mar 11, 2011 6:14am GMT

* Jan, Feb total output hits 114.18 mln tonnes
* Strong production attributed to small mills

BEIJING, March 11 (Reuters) - China's daily crude steel output rose 0.5 percent from January to a record high of 1.94 million tonnes in the holiday-shortened month of February, with private mills producing with abandon despite demand uncertainty.

China produced a total of 54.31 million tonnes of crude steel in February, up 9.7 percent from the same month last year, according to official data from China's National Bureau of Statistics on Friday.

Many Chinese businesses were shut for a week in February to mark the Lunar New Year holiday. According to Reuters calculations, average daily output in the first two months of 2011 was 16.6 percent higher than in December, when hundreds of small mills were forced to shut down to comply with a state energy saving campaign. "The ramp-up happened pre-Chinese new year and continued until late in the month when prices began to fall," said John Guise, China editor with Steel Business Briefing. "If you look at everybody's attitude and at steel prices just before the Chinese new year holiday, everybody was thinking it's going to get better and it was hard to find a dissenting opinion in the crowd."

Prices on the domestic market have been on the decline after hitting a peak in early February, with the industry blaming long-standing overcapacity problems as well as uncertainties about demand. While the industry is concerned about its prospects in 2011, producers are unlikely to cut output as long as they are still making profits -- however meagre. "You are not seeing large mills making production cuts -- we've heard billet producers who service smaller mills starting to make production cuts but the major steel makers are not and probably will not do so until they stop making a profit," said Guise. Traders are waiting to see whether or not industry leader Baoshan Iron and Steel will reduce its prices for April delivery, with an announcement due soon. The statistics bureau said China produced 63.54 million tonnes of steel products in February, down from 97.84 million tonnes in December. Iron ore output in February reached 72.45 million tonnes, down from 73.79 million tonnes in January and 98.21 million tonnes in December. (Reporting by David Stanway and Ruby Lian, Editing by Tom Miles and Ed Lane, sourced:Thomson Reuters)