China, steel sector seen lifting iron ore prices
14 May, 2008, 2143 hrs IST, AGENCIES
Planned expansions by major iron ore producers will not be enough to curb prices as China raises steel output and steel sector margins are big enough to pay more for raw materials, an industry conference has heard.
Major mining groups have been touting big plans to boost iron ore production, raising concerns that within a few years the market could be overwhelmed with surpluses that might bring a collapse in prices. But the combination of several forces is due to keep prices buoyant on the seaborne traded market, even after contract price hikes of 65-71 percent this year, the Metal Bulletin Iron Ore Symposium in Monte Carlo heard this week.
"We believe there will be another step change upwards over the next three to five years in the seaborne trade for iron ore on the demand side and it's a challenge to the iron ore industry," analyst Jim Lennon of Macquarie said. Growth in steel demand over the next five years is projected to grow at a faster pace than production and China is due to fill the gap, Lennon said.
"We don't believe there's enough non-Chinese steel capacity being built at the moment and the shortages outside China will get worse. We believe they will have to ramp up steel production and exports at a much faster rate than they've done so far." While China has been the main recent driver of the market in iron ore, the raw material to make steel, other emerging countries seeking to build up infrastructure will also boost demand in coming years, said analyst Daniel Brebner at UBS.
While Brazil, Russia, India and China make up the so-called emerging BRIC nations, a large group of smaller countries which Brebner dubbed "the next billion" have not caught the spotlight. The dozen countries include Mexico, Indonesia, South Africa and Vietnam.
"Their populations are going through this industrialisation phase, exactly the same kind of situation that China has been going through," Brebner said. FAT MARGINS While steel firms have complained about rising raw material prices, analysts said their price rises have more than compensated, giving them very attractive profit margins. Since the start of the year, steel prices on average have risen by over $400 a tonne, well in excess of the rise in costs of iron ore and coal of around $160 per tonne, Lennon said.
"Steel companies are not unhappy ... they can afford higher long term (iron ore) prices," said Rod Beddows, chief executive of privately owned Hatch Corporate Finance, which specialises in the mining sector. Both iron ore and steel prices while at nominal record highs, are still well under historic peaks in real, inflation adjusted terms, the analysts said. Even though the three biggest iron ore firms , Rio Tinto, and BHP Billiton have big plans to boost production, China is struggling with its own output of iron ore. Grades are already showing weakness and in a few years, Chinese production is due to decline, adding to the need for additional imports, the analysts said.
THE ECONOMIC TIMES
- Forums
- ASX - By Stock
- china steel sector seen lifting iron ore price
China, steel sector seen lifting iron ore prices 14 May, 2008,...
-
- There are more pages in this discussion • 23 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add BHP (ASX) to my watchlist
|
|||||
Last
$38.81 |
Change
-0.530(1.35%) |
Mkt cap ! $196.9B |
Open | High | Low | Value | Volume |
$38.65 | $38.86 | $38.46 | $405.6M | 10.48M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
8 | 13092 | $38.80 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$38.84 | 500 | 1 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
7 | 13062 | 38.800 |
1 | 77 | 38.780 |
2 | 523 | 38.770 |
1 | 6615 | 38.760 |
4 | 26213 | 38.750 |
Price($) | Vol. | No. |
---|---|---|
38.840 | 500 | 1 |
38.860 | 3000 | 1 |
38.870 | 180 | 1 |
38.900 | 38738 | 7 |
38.920 | 581 | 2 |
Last trade - 16.10pm 12/09/2024 (20 minute delay) ? |
Featured News
BHP (ASX) Chart |