Steel,Iron Ore Demand Growth Dependent On China

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

30 Sep 2010

Emerging market demand for steel and iron ore will be the main drivers in the coming years, with China the most important, analysts said Thursday. For iron ore, "global demand growth is important but it's really down to China," Macquarie analyst Jim Lennon said at a Steel Business Briefing seminar. Lennon forecasts China's demand for iron ore will pick up again in 2011, with a price between $150 a metric ton and $200/ton in the next two years.
"Without China we're in trouble--the world steel production ex-China is still languishing," said analyst Paul Gray from Goldman Sachs and Partners Australia Pty Ltd.
Gray forecasts steel production growth to average 4% over the long term. He said iron ore prices will rise in 2011 but he expects the market to be in oversupply by 2014 due to new output from areas like West Africa.
"The seaborne iron ore market has grown [an] average of 15 million tons [a year] and we expect doubling of that rate over the next five years," Gray said.
However, HSBC economist Mark Berrisford-Smith warned that while China got its economic growth right so far, that doesn't rule out the risk that it may falter.
BHP Billiton Ltd. (BHP) forecasts that China's steel demand will double by 2025 to 1.1 billion tons.
Further pressure on iron ore demand could originate from an increase in scrap from China by 2020, said CLSA strategist Ian Roper.
"Today China consumes 500 million tons of steel a year and after 2020 could be generating 100 million tons of scrap a year," Roper said.
That will dent iron ore demand, with iron ore prices likely to fall to $100/ton by the end of this year, he said.

Source: Dow Jones