Steel prices decline for seven consecutive weeks

15:32, June 11, 2010      

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On June 9, Wuhan Iron and Steel and Anshan Iron and Steel, reduced prices of their main products by 300 yuan to 1,200 yuan, respectively, after Baosteel cut their prices to the same amount.

Data released by the General Administration of Customs on June 10 shows that China had only imported 52 million tons of iron ore in May, the first decline since April and the first decline over the same period of last year.

According to data from the Beijing Lange Steel Information Research Center, China's steel products market has decreased steel prices for seven consecutive weeks, with the average price of long steel products and steel sheets declining to 5,185 yuan per ton on June 4, down 428 yuan per ton from the end of April.

Of all the price adjustments that the big-three steel mills have scheduled for July, the price of auto sheets, which is a high-end product with hot sales, is expected to decline the most. The price of Baosteel DC04 automobile cold-rolled coils will decrease to 6,476 yuan per ton in July, down 1,000 yuan per ton.

Meanwhile, the sharp rise of imported iron ore prices has resulted in a rapid increase of China's steel product costs. At present, the formerly low-priced iron ore in steel mills has been used up. Although different steel companies have different cost bottom lines, prices of China's steel products have all lowered to or are close to the cost of production.

Among the seven main steel products, six have a transaction price that is 300 yuan lower than the production cost per ton. The transaction price of billets and wire rod coils is 400 yuan lower than the production cost per ton.

Market demand from two main steel consumption markets, the automobile and real estate industries, has significantly declined and has put steelworks under growing pressure. On one hand, the growth of the domestic auto industry continues to slow down, and there have been over 1.1 million vehicles left unsold over the past five months, according to statistics from China Automotive Technology & Research Center. On the other hand, a series of government control policies have successfully cooled the domestic real estate market, resulting in a considerable drop in steel orders from real estate developers.

In 2010, China's steel exports have increased significantly due to the rising steel prices in the international market. According to customs statistics, China exported nearly 18 million tons from January to May, up over 127 percent from the same period of last year. However, some experts believe that the outlook for China's steel exports is not bright because of the unfavorable global economic situation and the recurrent protectionist measures adopted by foreign governments. There is little chance of a surge in the steel export volume in the short run.

Experts predict that the steel cost pressure will continue to exist at least in the foreseeable future. Mining giants such as Rio Tinto and Cia. Vale do Rio Doce have announced that they will raise iron ore prices, and it is almost certain that the average iron ore price will rise by 30 percent to 35 percent over the third quarter. If the cost of coke, electricity and salaries also increases, steel production costs will continue to increase in the short term, and the high cost pressure may become a key factor in the rebound of steel prices.

By People's Daily Online

Additional support provided by LOTO


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