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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (38392)	6/10/2009 8:23:13 PM
From: LoneClone	Read Replies (1) \| Respond to of 194001

Ore to China not driven by demand theaustralian.news.com.au Michael Sainsbury \| June 04, 2009 Article from: The Australian THE record iron ore exports to China that helped Australia dodge a recession have been driven by speculation and anticipation of demand by steelmakers that has not yet eventuated - and volumes, as well as prices, are likely to fall in the second half of the year. The future of 100 million tonnes of iron ore sitting in Chinese ports, steel mills and warehouses will be critical in determining how much Australian iron ore China needs. Experts says much of the surge in Chinese iron ore imports has been driven by traders, rather than steelmills, during uncertainty over the new contract prices for iron ore. Talks to set the annual price Chinese steelmills will pay for Australian ore were supposed to end in April but have been beset with more brinkmanship than normal this year, and continue to drag on. Domestic demand for steel in China remains weak, and speculation is rising that Beijing, which is already spending hundreds of millions of dollars to stimulate the economy, may have to step in to address the situation. Chinese manufacturing, which makes up 40 per cent of the country's output, continues to grow only slowly, according to survey figures released this week for last May. "The volumes in the ports and in stock are now far beyond those that are needed for production, so the volumes that are coming into China are sure to slow down in the second half of the year," Custeel.com analyst Fu Yao said. Huiquan Cao, president of Fortescue Metals Group investor Hunan Valin, said the record Chinese import volumes had been driven by speculation rather than demand, due to the uncertainty of the price negotiations and promised government spending on infrastructure. "If you look into the figures, most of the buyers are not the steel mills," Mr Huiquan told The Australian yesterday. "The spot price has been moving up and down significantly, which has influenced traders' behaviour ... in my opinion many traders and some steel mills will try to make a bet on the market." According to statistics from Chinese customs, the country imported 57 million tonnes of iron ore in April, compared with an average monthly level of 30million tonnes. Some of the increase in imports and stockpiles can be put down to high-cost low-grade Chinese iron ore producers being squeezed out of the market. Chinese iron ore producers have been hurt by a sharp drop in iron ore spot prices late last year. Lower prices have knocked out masses of expensive poor-quality Chinese iron ore mines, which had been brought into production during the record prices of the boom. This has increased the relative demand for Australia's low-cost, high-quality iron ore, mainly from Western Australia's Pilbara region. While spot prices are 60 per cent lower than at their peak last year, they are still well up on historical averages. "China has priced its own iron ore out of the market. The spot price is well below what is economic for a number of Chinese iron ore mines," said Graeme Rowley, executive director at Fortescue, the third-biggest iron ore producer in Australia. Mr Rowley said he expected Australian export volumes to stay strong in coming months due to the higher quality of Pilbara and Brazilian iron ore, compared with much of the seaborne market. But contract prices are likely to be far lower than the records enjoyed during the March quarter. Despite anger in China, steel mills are considered likely to accept cuts in Australian iron ore prices of 30-40 per cent rather than the 50 per cent-plus they were seeking.