world steel share prices rise on back of 13% inc i, page-17

drop in expected iron ore price will be a kicker JP Morgan has iron ore up ONLY 7.5%
Price of steel estimated to rise up to 18%
Low margins at the moment ... about 9% but revenue has almost tripled on higher volumes.
6/02 6/03 6/04 6/05
Revenues ($million) 4,913 5,272 5,737 18,035
A price increase of over 10% could lead to a big change in the bottom line.
But depends if the iron price surprised on the downside.

ARTICLE

Commodity strategists: Iron ore gains may slow this year, JPMorgan says
Source: Bloomberg



See also
Iron Ore Board
Iron Ore CatalogPrices for iron ore, which is used to make steel, may rise 7.5 percent this year as Chinese demand growth slows and miners increase supply, JPMorgan Chase & Co. said. That would be almost a 10th the size of last year's gain.

JPMorgan's estimate is the lowest of four made by investment banks in the past two months. ING Groep NV on Jan. 24 estimated prices would gain 20 percent, while Merrill Lynch & Co. on Feb. 7 raised its forecast to 18 percent. Credit Suisse on Jan. 23 said it expected prices to rise 15 percent. Prices rose by a record 71.5 percent last year.

Global supplies of iron ore, the main ingredient in steelmaking, will rise 8.8 percent this year, outpacing demand growth of 6.2 percent, JPMorgan said. China may close about 100 million tons of inefficient steelmaking capacity, London-based analysts Anindya Mohinta and Jon Bergtheil said in the Feb. 20 report. World steel output was 1.13 billion tons last year.

"We believe that China's fragmented steel industry is on a perilous track in an environment of weak domestic prices, coupled with soaring input costs," the report said. "Smaller players will eventually be forced to either merge with larger companies or phase-out outdated plants."

Iron ore and coking coal, which also rose to a record last year, account for about 30 percent of steelmakers' costs.

Mining companies and European and Japanese steelmakers are currently negotiating annual iron ore supply contracts, which usually begin April 1.

Chinese monthly iron ore import growth fell below 30 percent in the second half of 2005, compared with an average of 41 percent in 2004, JPMorgan said.

Higher demand
Higher demand for iron ore has spurred the three-biggest producers to increase production, the bank said. Iron ore supplies from Melbourne-based BHP Billiton, London-based Rio Tinto Group and Rio De Janeiro-based Cia. Vale do Rio Doce account for three-quarters of the global total.

The three mining companies will increase output by as much as 15 percent between 2005 and 2007, the report said.

"We feel that we are past the chronic tightness witnessed in 2004 and 2005 and are now entering the early stages of an easing in the iron ore market," the analysts wrote.

Australia, the world's largest iron ore exporter, may raise output by as much as 22 percent to 292 million tons this year, from 240 million tons in 2005, the Australian Bureau of Agricultural & Resource Economics said yesterday. The gain would be a record in tonnage terms, the Canberra-based government forecaster said