nice if ago was $30, page-17

Hi Everyone,

The following story just shows that the demand for iron ore from China is extremely strong.

jojo

http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Metals/8345398



China's higher-than-official steel output supports iron ore: MEPS


London (Platts)--15Sep2011/854 am EDT/1254 GMT




China's steel output at higher than officially reported figures as mills are relit to meet surging demand for construction steel is supporting high seaborne iron ore prices, rather than any overbuying by traders, consultants MEPS said in its latest report.

China's crude steel output may have been under-reported by 10.6 million mt during the first half of 2011 as a tight market for construction steel incentivized previously closed out-dated capacity to resume production this year, said the latest MEPS China Steel Insight issue obtained by Platts Thursday. That differs from in 2010, when operators facing government curbs on overcapacity and energy produced illegally.

Steel Markets Daily provides you with Platts' expert commentary including comprehensive daily and monthly articles and news briefs on each of the critical markets -- plus, access historical prices for hot-rolled coil, rebar and other products. You will also have access to 25 daily spot market prices and monthly averages from trading hubs in Europe, North America and Asia.





"If account is taken of under-reported steel output, China's imports of iron ore are in line with requirements during the first half of this year, and Chinese demand for the material should continue to support prices," report author MEPS consultant Rafael Halpin said.

"Steel production by illegal mills has contributed to record demand for domestic iron ore, which can only be met by the engagement of high cost iron ore producers. With a tight global supply of iron ore, this is acting as a floor to seaborne prices, pushing values up."

Higher construction demand for steel, and iron ore prices supported by this trend, is supporting product prices, MEPS added. The UK-headquartered consultancy forecasts Chinese rebar prices will average this year 17% higher than in 2010 at Yuan 4,700/mt ($735), including VAT.

IRON ORE SUPPLY STRETCHED AS CHINA OUTPUT 'RAMPANT'

Other analysts agree that China's steel output growth is supporting iron ore prices.

"The global supply chain remains stretched to the limit while rampant Chinese steel production growth is bolstering demand conditions," Macquarie Commodities Research said in a report obtained Monday, in its analysis of Brazil iron ore port movements.

"Sentiment-driven purchasing behaviour of small Chinese steel mills will continue to be critical to price direction, with the country's construction sector gaining ever more significance given ex-China growth concerns," the Macquarie analysts added.

The Platts IODEX 62%-Fe iron ore assessment has held around $180/dmt CFR China for the last month, rebounding from a recent low just above $170/dmt CFR at the end of June.

MEPS said its analysis counters recent comments by China Iron and Steel Association secretary general Luo Bingsheng, who asserted Chinese iron ore imports were 18 million mt above requirements between January and July this year on the basis of reported steel production. He suggested this surplus should help alleviate high prices, the MEPS report said.

Chinese government plans for work on 10 million economic housing units to start this year has pressured local steel supplies, Halpin told Platts in an interview from Sheffield.

Insufficient supplies of construction steel such as reinforcing bar will keep Chinese steel prices high as the government in the past drove the closure of and restricted investment in inefficient, high cost rebar and wire rod producers in favor of higher value-added flat steel mills, he said.

China's crude steel output in 2010 may have been as much as 672 million mt -- 45 million mt, or 7.2%, more than the officially reported 627 million mt total -- and could reach 733 million in 2011, MEPS's latest figures show.

It upgraded the extent of actual steel output it expects by 5 million mt since a July forecast of 728 million mt. Officially, steel output in China may rise to 705 million mt in 2011, from an earlier MEPS forecast of 700 million mt to be reported by authorities for 2011.

In 2010, steel mills were pressured to shut or reduce capacity to meet government targets to close out-dated capacity but remained operating to a degree, Halpin said. This year, however, smaller mills forced to shut in the past have resumed output covertly to benefit from high margins, and inflation concerns are preventing the central government cracking down to curb operations, he said.

"This year there has been less pressure from central government to shut smaller furnaces as there's not enough supply," Halpin said.

"The central government appears to be tacitly acknowledging that without this out-dated capacity there would not be sufficient supply of construction steel, to meet the current demand from infrastructure and social housing projects."

--Hector Forster, hector