Chinese domestic iron ore prices to face downward pressure

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Aug 2008

It is reported that steel market maintains modest downswings in recent days and steelmakers suffer greater pressure from fund and cost. Most steelmakers beat down purchase prices for ore fines and seldom take mass purchasing. On the other hand, given few transactions, miners are not so confident in future market. Though supply and demand sides are still in stalemate, miners are increasingly likely to compromise, in view of decreasing purchase prices and still huge profits at current prices. Steelmakers will face bitterer situation in the coming days and iron ore fine demand may slump. Due to weak steel demand, steel traders report difficult sales and huge stocks, which press steelmakers. Against such a backdrop, most steelmakers in Tangshan will gradually step into production suspension before mid Sep. large amounts of steel stocks indicate even if steel market turns better demand for iron ore will not revive in a short term.
Besides, both spot price and futures price have dropped dramatically owing to shrinking demand. Price for imported iron ore is at least CNY 150 per tonne lower than that for home one, hence sliding imported ore price severely impacts domestic ore price. In the meanwhile imported iron ore supply keeps sufficient. As a result, even steelmakers expand purchasing, they will seek imported resources. This will further embarrass domestic ore and home ore price can barely remain at current level. Moreover, continuous price beats and dull demand have weakened miners' confidence. Miners may fear their profits will decrease as prices nose down. Some are anxious to undersell resources to cash out.

Source: MySteel.net