chinese steel production 850mtpa! 2012

Hey Guys

Again more evidence that iron ore prices will continue to hover well above $130 per tonne for a long time to come! From todays Australian Newspaper. China is set to consume 850,000,000 tonnes of steel in their construction, auto, rail, road industries in 2012. An increase from 700,000,000 tonnes in 2011. This 850million tonne steel production number equates to 1.36Billion Tonnes of iron ore!

Or an increase of 240 million tonnes or the equivalent of 6.8 Mbalam and Nebeba iron ore mines of additional consumption!

SDL conti ues to use $62 per tonne in their calcs for a 3 year pay back. If we use a more realistic iron ore price of $130-150 per tonne, the 3 year payback significantly shortens to between 12-18 months!

Cheers Nectar



China?s steel output running red hot
September 8, 2011, 12:00AM

RECENT turmoil in the global economy has yet to touch China?s still-booming steel sector, which looks set to produce a record 700 million tonnes this year, keeping iron ore prices near record highs with Australian miners major beneficiaries.

And the sector has been forecast to soar even further next year, producing as much as 850?million tonnes in 2012, as China?s unprecedented?industrialisation and urbanisation?continues.

?Demand for iron ore remained strong with China?s crude steel output barely missing a beat in the traditionally slow summer season,? Singapore-based The Steel Index said in its monthly report. ?After a brief dip in July,?annualised output looked on track to have surpassed 700?million tonnes again in?August.?

Mu Wenxin, an analyst at consultancy Custeel.com, said the group also expected steel production to reach 700?million tonnes this?year.

?We are forecasting that it will increases to 850?million in 2012. Given China is still a developing country, the economic growth will remain a certain pace,? he?said.

?In several industries, including real estate, railways and road, automobile and ship building ? all major consumers of steel, growth is still optimistic, hence supporting the demand for?steel.?

Mining profits are once again expected to be strong for the coming quarter, after prices edged up in August, with the monthly average of The Steel Index?s 62 per cent Fe fines benchmark reference price rising 2.6 per cent to $US177.45 per tonne for the Chinese?market.

The average over the June-August quarter was down just 0.6 per cent from March-May. Iron ore contracts for the quarter ahead are set on prices from the previous quarter. Price strength was helped by continuing tight supply from India, where a combination of monsoon rains and bans by various states on exporting iron ore saw lower?shipments.

Apart from the pure growth figures, the?Australian iron ore sector has received a boost recently from a downturn in Indian?supply.

?Chinese import data for July released last month showed an almost 50 per cent drop in Indian volumes entering the country compared with June. However, the fall was offset by a large jump in?Australian imports, which rose 16 per cent,? The Steel Index?said.

Still, high commodities pricing continues to dent the?profitability of the Chinese steel sector, which the state-run China Iron and Steel Association now claims is less than 3 per?cent.

?It?s generally recognised that the Chinese steel industry is running at low profit margins ? 2 to 3 per cent in the last year ? even lower than bank interest, as a result of oversupply in production and disordered competition,? Mr Mu said. ?Except Baosteel (China?s premier steelmaker), other mills? profit are far behind of that of Japan and South?Korea.?