Imported Iron Ore Market- Purchase Dropped with Price and Easing Profits \ 5-9-2014 +
Umetal-China, imported iron ore prices fell further towards USD 80 level. The tender Rio Tinto sold yesterday concluded new low while spot cargo at ports declined RMB 5-10 also.
Steelmakers are now standing outlined watching the continuous fall in iron ore prices as meanwhile, steel prices are also continue hitting new lowest points and tightened the cash flow and profits. Profits from steelmakers are mainly from the decrease iron ore prices. Demand of steel products failed to have obvious increase so far as which can be seen on the continuous falling in steel prices. Some market player saying the better macro-economy situation and better steel export provide support to steel demands but to be honest, those factors are either too tiny or don't have direct connection with steel demands.
Since Q2, China Development Bank revised down the deposit-reserve ratio for loans to "Sannong" (agriculture, countryside and farmers) and to small and medium enterprises. However, this idealized measure got problems in real execution. Banks are still not very warm in lending money to small companies as a) their balance sheet or financial paper could be easily modified on purpose; b) their ability for paying back are in doubts; c) and most importantly, quite some loans to small companies have been lend to other companies with higher interests or been invested into other industry for better profits instead of using in their own companies; 2> The Shanty-area Renovation project is to have over 7 million suits of affordable houses with 4.7 million in shanty-area. The number seems so big but if you can put few minutes to think about this issue, the number would not provide such “big” support. What’s the real support of this project to steel demands? First, there’s not much difference between commercial and affordable houses. The average steel consumption of Chinese high-level building is 80 kg per square meter; muti-level at 50-60 kg; 6-8 level houses at 58-65 kg. Then, I take 60 square meters for a suit of affordable houses (affordable house, especially in shanty-area, the goal of those buildings is to ensure people to have a house to live instead of having a bigger house, which means the house is absolutely not big). In commercial houses, breadth of amenities is quite the same to its houses in common with 40-50 kg per square meter steel consumption; but affordable houses get only half of the size. Third, I take the lowest level in steel consumption 50kg/m2 for house and 40kg/m2 for amenity. Thus, a 60m2 affordable house in shanty-area will cost 60*50+40*30= 4200kg = 4.2 tonne steel consumption.
Then 4.7 million houses will cost 4.2*4,700,000 = 19,740,000 = 19.74 million tonnes in steel consumption.
Consider this with the steel production in China -780 million tonnes crude steel in 2013 equals to 730 million tonnes finished steel products if 94% or crude steel could be made into finished products (according to China Steel Yearbook 2013).
Thus, 19.74 million tonnes steel consumption in the Shanty-area Renovation project takes only 2.7% compared with total steel production in 2013 if we consider the whole 700 million suits, the ratio is still only 4.0%.
Once imported iron ore price dropped about USD 20/tonne, it might provide RMB 300 drop in pig iron cost.
The iron ore price had dropped around USD 10-15 in past weeks, but billet EXW price had dropped over RMB 300 in past month. The profits of steelmakers are easing. (Reporting by Nick Zhang)
Domestic Ore Market Shows Further Sign of Decline\ 5-9-2014 +
UMETAL-CHINA, Domestic iron ore concentrate market and the purchasing prices of steel mills generally keep steady today. Only market prices decrease by RMB30-50/tonne in Guangdong. Foreign quotes of imported iron ore fall further by US$1-2/tonne and spot market prices also drop by RMB10/tonne in most ports. Specifically, the sales price of Indian fines (Fe: 63.5%) slips further by RMB10/tonne to RMB620/WMT (vat included) in port Tianjin and the domestic iron ore concentrate price is still pegged at RMB610/WMT (vat excluded) at Qianxi. Imported iron ore spot market prices fall by RMB10/tonne in most ports today and billet prices decrease by RMB30/tonne to RMB2,450/tonne in Tangshan. Under diving steel and imported ore prices in recent days, domestic ore market faces great pressures. Guangdong Dading Mining Co., Ltd. reduces its iron ore concentrate (Fe: 64%) EXW prices by RMB50/tonne to RMB600/tonne. Market prices fall by RMB30-50/tonne in south China market. Large miners in north and east China have great difficulties in delivering cargos and are likely to cut down their offers by RMB10-20/tonne tomorrow. Price gap between domestic and imported ore is increasing. According to the China Iron and Steel Association (CISA), daily crude steel output of key steelmakers reporting to the CISA came to 1.6768 million tonnes from Aug 20 to 31, dropping by 8.35% from ten days ago. Following domestic ore market is not optimistic in the short term.
Iron Ore at Lowest in Nearly 5 Yrs, China Rebar Futures Rout Continues \ 5-9-2014 +
Spot iron ore prices have fallen to their lowest in nearly five years, and China rebar and iron ore futures both dropped on Thursday to record lows, with credit still tight and buyers waiting to restock. Benchmark 62 percent iron ore for immediate delivery into China fell 1.15 percent on Wednesday to $85.7 per tonne, its lowest level since October 2009.
Ample volumes of cheap Australian supplies have been made available, with deliveries to China from Australia's main iron ore port, Port Hedland, reaching 32.03 million tonnes in August, up 4.8 percent from July to a record high. Traders and analysts in China, the biggest iron ore buyer and the destination of more than two-thirds of seaborne supplies, said that there was currently not quite enough demand to bring higher-cost material back on the market.
"There is still demand but it has a limit and if you keep producing more and more, prices aren't going to improve," said a trader based in Beijing. "A September recovery is unrealistic I think, but it might happen in October, if there's stimulus." But activity in China's services sector rebounded more than expected in August, two surveys showed on Wednesday, and that might effect the strength of any action from Beijing to maintains its 7.5 percent growth target, some analysts said.
The most traded rebar contract on the Shanghai Futures Exchange fell 1.29 percent on Thursday to 2,838 yuan ($465) per tonne, the lowest close since the rebar futures were launched in 2009.
The most active iron ore contract on the Dalian Commodity Exchange dropped 3.1 percent to 594 yuan per tonne, its lowest since the contract’s launch in October last year. "It seems that the whole iron and steel industry has reached its Waterloo in just eight months," said Meng Chengxiang, analyst with online trading portal GTXH.com.
But Meng said it was still increasingly likely that Beijing will introduce mini-stimulus measures to hit its growth targets and that banks will loosen credit restrictions, thus raising steel demand. While "excessive pessimism" now prevailed, there was a good chance that spot iron ore prices would recover to more than $90 per tonne by the end of the month, Meng said.
As many as 10 of China’s listed steel firms reported losses in the first half of the year, according to research published by Shanghai Securities News this week, with overall net profits from 33 listed mills down 43.5 percent over the period. Many of the mills claim to have been suffering not only because of a collapse in product prices, but also because of growing environmental costs, with the Kunming Iron and Steel Group last week saying it had been suffering losses of nearly 200 yuan per tonne of steel produced.
China has sought to use rising environmental compliance costs to drive inefficient and small-scale producers out of the market and help meet capacity closure targets for the year.
But steel mill margins could start to see an improvement going into the third quarter as lower input costs start to have a bigger impact, China’s second largest steel mill, the Baoshan Iron and Steel Corp, said in a briefing to shareholders last week.