China’s booming steel exports have surprised market, says BHP
China’s apparent crude steel consumption fell 3.4 percent from a year ago to 738.3 million tonnes in 2014, the first drop since 1981, according to the China Iron & Steel Association. “While the world remains flooded with iron ore, we believe Chinese steel consumption is at or close to a structural peak”.
China’s steel output hit a record 822.7 million tonnes in 2014.
More steel mills in China’s Shanxi province have halted production due to shrinking demand and shortage of cash, industry consultancy Custeel says.
The bank lowered its three and 12-month price targets to $40 and $35 per tonne.
“Steelmakers will still sell their iron ore stocks before the February Chinese Spring Festival because there are also expectations of further production cuts”, Wang said.
Chinese miners, therefore, will not further reduce prices unless seaborne cargoes fall below $40/dmt CFR North China and hold there, they added.
A procurement official from a 3 million mt/year steel mill in Hebei disclosed that they have been relying on iron ore supplies from term contracts despite prices being than on the spot market because of tightness in cash.
In the fiscal year that ended March 2015, Japan imported a total of 136.8 million tonnes of iron ore, 61.1 per cent of which came from Australia and 26.5 per cent from Brazil.
Under such circumstances, iron ore inventories should be as low as possible as mills need to be ready to cut production should other means of trimming costs be insufficient, market sources said.
“It is already hard to sell iron ore, and much more hard now”. “When you have spreads compress, maybe you have Dalian buyers on the back of that (but) it really comes down to physical market sentiment at the moment and I think that will continue to weaken”, said a London-based iron ore broker.
“That is the spirit of competition that we play in”, he said according to Reuters.