Chinese steel industry wounds are further torn- 14 Jun 10

In the third quarter of the year, the downstream demand makes a sharp contrast to the upstream cost, and the gap between them is getting bigger and bigger, further tearing Chinese steel industry wounds that have already existed or will soon appear.

On the 4th of June, after six month long up or flat plate factory price, Baosteel had for the first announced a price fall. It is thus conceivable that many steel mills will follow Baosteel in the mid June, making Chinese steel market anything but gloom by collective price cut.

This unexpected steel market decline is rather a sign of the weakening downstream demand than an effort by Baosteel to make up falls, which means the previous small profit margins will become no profit at ll. The overcapacity of Chinese steel industry is facing serious challenge now, and lots of steel mills may choose to cut production.

One top officer of a steel mill in East China told the reporter that the iron ore purchased at low price in the earlier period enables steel mills to stay profitable, but as this part of stock is nearly exhausted now, Chinese steel mills will have to purchase iron ore at a higher price in the short future. Some mills may face losses, which will result in the collapse in demand and price for imported iron ore.

This viewed is widely shared. According to the survey made by steel consulting provider Mysteel, among steel mill persons, 70% think that the iron ore import market will drop, 28% think it will stay flat, and only 2% think it will rise; among traders, the figures are 60%, 34% and 6%.

To many steel mills, the future fall of iron ore import market is a precious chance, but it is only possible if they can survive the rigorous third quarter.

Jun 14, 2010 08:22
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