Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (31571)	6/6/2005 2:28:10 PM
From: RealMuLan	Read Replies (2) \| Respond to of 116555

China defers iron ore shipments as surplus hurts 07 June 2005 HONG KONG: Steel mills in China, the world's top steel producer, are deferring shipments of iron ore as profits are squeezed by overcapacity, Beijing's fresh measures to cool the economy and a global economic slowdown. Sharp falls in domestic steel product prices prompted mills in China to delay term shipments of iron ore from Brazil and Australia, industry officials and traders said yesterday. The turnaround in steel product prices in the past few weeks had destroyed confidence in the sector, they said. "Everybody is horrified...They can barely cover the costs," said a senior iron ore trader at a major Chinese trading house. "They are trying to arrange (iron ore) shipments for later months. The situation is really bad. Prices for international market are not very good either. It's terrible." Delaying shipments by even a few days could result in substantial saving as daily rates for large cape-sized ships - used for hauling iron ore to China from Brazil or Australia - were dropping by more than $US1700-$US1800 ($NZ2400 - $NZ2600) a day on average in the past few weeks, they said. The world's top mines supplying iron ore to China on long-term contracts include those operated by Companhia Vale do Rio Doce (CVRD), Rio Tinto Ltd and BHP Billiton. Prices for 2005 term contracts rose 71.5 per cent from April. Chinese steel giants Baoshan Iron and Steel Co Ltd, Wuhan Iron and Steel Co Ltd and Angang New Steel Co Ltd lead a sector crowded with hundreds of mills, many of which are trying to expand and move up the value chain to survive. Chinese crude steel output jumped by about 25 per cent in the first four months of 2005 to 105.94 million tonnes, despite Beijing's measures to cool the sector. Adding to bearish sentiment in the sector are high stocks of iron ore in Chinese ports - estimated at between 30-40 million tonnes after imports soared by 28 per cent to 87.55 million tonnes in the first four months of the year. MARKET TURNS SOFT Beijing has struggled for over a year to curb investment and lending to certain sectors, including steel, fearing a boom in the world's seventh-largest economy would turn to bust. The industry officials and traders said this time Beijing might succeed. The global steel market has turned soft, closing the door for Chinese steel mills to export their way out of the slump and resulting overhang at home as they did a year ago. "The construction and the real estate market are really not doing well," the Beijing iron ore trader said. "But the most terrible thing is the international market. No one is strong enough to pull up the market." Asked about steel exports by China, which now accounts for nearly a third of global crude steel output, he said: "China will be a net exporter this year. China cannot export much, but it will import even less." In May alone Chinese prices for hot-rolled coil fell 1500 to 2000 yuan ($NZ256 - $NZ343) per tonne to below 4000 yuan per tonne, the Beijing trader added. The slowdown has pushed freight rates from Brazil to China down to $US20 a tonne, half the first quarter level, shipping officials said. Some of the world's top steel makers, including Arcelor and ThyssenKrupp, have already announced production cuts to counter a downward price trend. Mittal Steel Co, the world biggest steel maker, said in May that consumption in the United States was suffering from an inventory overhang. The recent deferrals come as spot iron ore orders from China have been at a virtual standstill since April. The dearth of orders has led to a slump in Indian ore prices and international dry-bulk freight rates, which hit an all-time high in December. Spot Indian iron ore prices - which are seen as the barometer for China's steel sector - fell to below $US70 a tonne, including cost and freight, from about $US95 early in April, iron ore traders said. Another iron ore trader based in northwest of China said: "What we really want to know is when it (the iron ore price) will stop falling, where is the floor? If we knew when it would stabilise we could at least make plans." stuff.co.nz