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Jinxi Steel Group got USD 550mln finance overseas Sept 3 MetalBiz—Recently, the international investment bank--Deutsche Bank and ING Bank issued USD 550mln debenture staked by China Oriental Group successfully. Currently, the debenture has been listed on Singapore Stock Exchange market. Han Jingyuan, the president of China Oriental Group’s board of directors, introduced that the fund is mainly used for the new products development and energy-conservation and emission-reduction of Jinxi Steel Corp, besides, it would also been used for the consolidation of the steel industry. The successful move of China Oriental Group provided the sufficient cash for the product updating and the expansion of the upstream industry of Jinxi Steel Group. It also laid a solid foundation for the new development of the group.
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Japan's Jul steel export slid 13.7% m-o-m Sept 3 MetalBiz—Japan's statistics data showed that in July of 2010, Japan’s steel exports stood at 3.335mln tons, up 4% year on year, down 13.7% month on month. The export amount totaled U.S.$3.74bln, up 33% year on year.
Among steel exports, common carbon steel export was 2.257mln tons, up 10.1% year on year. Amid the common carbon steels, HRC exports were 647,000 tons, down 9.4% year on year; galvanized sheet exports for 491,000 tons, up 47.9%; CRC exports for 313,000 tons, down 4.4%; heavy plate exports for 301,000 tons, up 0.1%; welded pipe exports for 95,000 tons, up 310%; silicon steel plate exports for 72,000 tons, up 29.5%; section exports for 61,000 tons, down 7.8%; seamless steel pipe exports for 50,000 tons, down 1.2%; wire rod exports for 38,000 tons, down 5.5%; bar exports for 19,000 tons, up 6%.
According to export direction, the exports to S. Korea were 795,000 tons, down 9.3% on an annual basis; exports to China mainland for 605,000 tons, down 4.5%; exports to Thailand for 366,000 tons, up 37%; exports to China-Taiwan for 198,000 tons, down 32.3%; exports to America for 149,000 tons, up 75%. |
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Luo Bingsheng: iron ore supply & demand relation changes |
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Sept 3 MetalBiz—Curbing overcapacity is one task of adjusting steel industry and prospering plan, but the effect is unsatisfied. On the one hand, overcapacity still exists, and industry posts the increasing production and the decreasing revenue. The data from CISA showed that in 2009, the steel production of main large-scale and medium steel mills rose 11.27% than 2008; but the total industry product value dropped 12.75% year on year, and the sales earning slid 10.1% on a yearly basis, the profit down 31.43%. On the other hand, the industry concentrate is still inadequate. In 2009, the total steel output of Hebei Steel, Baosteel, WISCO, Ansteel-Bengang, Shagang was 165mln tons, accounting for only 29% of the total national production, far from the target, 45%.
Luo Bingsheng holds that merger & acquisition is one barrier steel industry faces, and too low concentrate is one of important issues China’s steel industry confronts. Steel producers not only provide all kinds of steel products, but also provide various kinds of solutions to the problems users consume steel products.
Focusing on the iron ore supply & demand relation
Iron ore long-term pricing system has not come into being for one day. Luo Bingsheng said that as one of the global bulk products, it differs from food, petroleum, iron ore must be supplied to steel enterprises, meanwhile, steel producers must buy iron ore from ore miners to secure the raw material demand.
So steel enterprises and ore miners are cooperators, their supply relationship is long-term and friendly.
As the iron ore pricing system changes, since 2010, the long-term mode turns to quarterly price, and the future development is on the negotiation.
Luo Bingsheng pointed out that from the current situation, the new index price posts new problem, index has no representative, authority and science. Index price exists may issues, which needs to be further talked.
Luo Bingsheng stated the current iron ore supply & demand relation takes place change, different from the global iron ore supply & demand situation in the beginning of 2010. Firstly, during January-July, China imported 360mln tons of iron ore, a rise of 5.25mln tons year on year, up 1.48%, the import increase extent down 30.28 percentage points than 2009. Since Q2 of 2010, China’s iron ore import plunged for the continuous 4 months, the iron ore import sank 2.94% in April year on year, down 2.92% in May, down 14.72% in June, down 11.71% in July.
Secondly, China’s home-made iron ore total output hiked to large extent, for the January-June period, home-made iron ore production reached 583mln tons, a climb of 127mln tons, up 28% on an annual basis, the increase in home-made iron ore yield is main reason for the consecutive decline in the iron ore import volume, the home-made iron ore supports the demand from steel makers, so the dependent extent on imported iron ore constantly glides.
As of the global supply & demand situation, Luo Bingsheng noted that during January-July, the global steel output still covers, not reach the level before the financial crisis in H1 of 2008, apart from China, the iron ore demand from all the countries and regions has not reached the level in H1 of 2008.
The aforesaid statement proves that iron ore supply & demand has changed, quite different from the situation in the beginning of 2010.
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Fair iron ore pricing system hides snare, steelmakers no optimism |
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Sept 2 MetalBiz—Several days ago, Brazilian Vale stated that as the recent China’s iron ore drops, the company may reduce iron ore price 9%-10%, to U.S.$135 per ton. This is adjustment for quarterly price according to China’s spot market price index.
As one of the world’s three iron ore giants, the adjustment is of great significance, which seems to prove to China’s clients that the index price used by three iron ore giants is very fair--------it can rise and slip.
Can’t deny, the price issued by Vale this time is definitely calculated in accordance with Platts index. But it is found out that Q3 iron ore price hiked 30%, compared to this degree, 10% is few. It is predicted that the steel producers will encounter the sluggish market demand pressure even vast risk under the index pricing game rules.
Steelmills anxiously wait for ore miners’ new offer.
Apart from the production, entry September, many steelmakers start to wait anxiously for ore miners’ new quotation. Because according to the previous quarterly pricing game rules, three big ore miners will fix Q4 ore price by calculating the spot index average price of June-August.
One person of one large-scale steelmills in Central China confirmed to reporters that they have not received the Q4 offer from Vale. But he said that the offer will come out recently. He added that as of the previous experience, Rio Tinto also follows Vale’s offer, and BHP Billiton’s offer will be fixed according to many kinds of flexible price modes.
Although they have not received the formal offer, but the aforesaid person also saw the statement of Vale. He noted that it is expected that the falling extent is at this level, and the iron ore price will not be lower than U.S.$135 per ton.
From May, 2010, the domestic spot iron ore underwent a round of sharp decline, during May-June, the falling extent reached 24%-25%, for July-August, although the iron ore price rebounded 13%-14%, it is still lower U.S.$20 per ton than the peak during April-May, so Q3 long-term contract iron ore price is still higher spot iron ore.
However, the drop in spot iron ore price, makes Q4 long-term price to follow down. Just recently, Brazilian media cited words of Jose Carlos Martins, Vale’s CEO that the company planned to cut down iron ore price 10% in October, from U.S.$150 per ton to U.S.$135 per ton.
Steelmakers’ operation is not optimistic in later period.
Steel mills still face the overcapacity and the depressed steel price, according to the practice, iron ore price should fall back. One inner person of CISA told reporters that this can ease the pressure of steelmakers to some extent, but it can’t reverse the difficult situation China’s steelmakers face currently.
If iron ore price glides 10% in Q4, that is, falling U.S.$15 per ton, the steel cost sinks less than 200 yuan per ton correspondingly, so the ease effect on the pressure steel industry faces is limited.
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Pricing system chaotic, ore price drop hard to change, steelmakers' Q4 profit to get better |
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Sept 1 MetalBiz—Iron ore pricing system posted the preceding-unseen chaotic. The global annual long-term system was broken completely, quarterly pricing, even shorter-term pricing system is in the adjustment stage, causing the Q4 iron ore price which will be issued also posts different situation.
According to insiders, at present, three big ore miners are in the dominate status, but their attitude towards China’s enterprises changes, especially when Vale’s Q2 sales quota in Chinese market significantly dropped, they said that Q4 price will be cut 10%, so steelmakers’ Q4 profit will possibly turn better.
Vale said that it will reduce iron ore price.
Q4 will come, Vale initially said that it will lower the iron ore price 10% based on Q3 price, from U.S.$150 per ton to U.S.$135 per ton. Actually, according to the current pricing mode, it is inevitable that Q4 iron ore price slide.
One person of one steel mill in East China told reporters that the reason for the decline in quota is that the iron ore grade from Brazilian ore to China declined.
During the global financial crisis, part of Brazil’s mining areas stopped production, but as the market in H1 got better, European steelmills’ capacity recovered, ore appeared undersupply. More high-grade iron ore is provided by Vale for European steel producers, in contrast, the grade of iron ore which was provided for China was 62%-63%. The aforesaid person claimed that part of steel mills believed that Brazilian ore sea transportation distance is long, the freight is high, the ore price is relatively lower, at last, steel mills decided to cut Vale’s ore purchase volume. It is said that Vale’s quota in China market was previously 22%, now, falling to 17%, which undoubtedly aroused the attention of Vale.
Iron ore pricing system is preceding-unseen chaotic.
Currently, the iron ore pricing system posts chaotic, all the kinds of calculation formula and price index war in China market, capturing market.
The information from steelmills said that presently, Rio Tinto and Vale mainly take quarterly pricing system. Apart from the monthly price, BHP Billiton and FMG also use index price.
No matter what kinds of price mode, as Q3 spot price continued slipping, compared to Q3, it is difficult for Q4 to change downtrend. In accordance with the estimation of TSI, Vale’s Q4 iron ore price FOB is U.S.$134 per ton, and Rio Tinto is U.S.$128-130 per ton. As calculation, Rio Tinto’s Q4 price fall extent will exceed 10%.
Steel producers’ profit in Q4 will get better.
Currently, iron ore spot price is U.S.$152 per ton, and the transaction is gloomy. The new quarterly agreement price glides, which necessarily affects spot price, so cost pressure of steelmakers will be somewhat mitigated.
In addition, the traditional rush-season in steel market will arrive. Although the slack situation emerges in busy-season, the relief appeared before transaction.
Steel analyst, Zhou Xizeng noted that product house market returns to normal, so the end demand for steel products will recover, and therefore steel producers’ days is not better than H1, but better Q3.
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Steel enterprises' Jul profit dropped 54% m-o-m |
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August 31 MetalBiz—Since profit in June shrank, the overall profit of China’s large-scale and medium steel mills in July continued slipping. China Iron and Steel Association’s data revealed that in July of 2010, large-scale and medium steelmakers achieved the total profit of 2.86bln yuan, a decline of 3.39bln yuan than June, down by 54.24% month on month, down 73.05% year on year.
During the January-July period of 2010, the nationwide large-scale and medium steel enterprises’ accumulative profit hit 53.71bln yuan, a climb of 41.416bln yuan, up 3.37 times.
CISA holds that although the domestic steel market price started to warm up late in July, the EXW price of the main large-scale and medium steelmills significantly glided, the industry profit of the industry in August is worse than July.
Shangang, Guanggang, Magang, Pangang and Valin made the loss. The information noted that in July, the large-scale and medium steelmakers’ loss range enlarged rapidly, in June, 14 steel producers posted the single month loss, in short time, the number rose 28.
Just based on July operation situation, many listed steel enterprises are not optimistic about the Q3 performance. Among them, Ansteel predicted that its Q3 single quarter performance will range the loss of 450mln yuan to the profit of 150mln yuan. Guanggang directly expected that it will appear the loss in Q3.
*ST, Baogang, who own iron ore resource, forecast that Q3 profit is 122mln yuan and 126 yuan. Steel giant, Baosteel also estimated that its Q3 profit stands at 800mln-1.58bln yuan.
The profitability of Baosteel is definitely strong, its net profit in July accounted for nearly 70% of the whole steel industry. The source declared that Baosteel’s July profit was 1.939bln yuan.
Despite profit, like Baosteel, its general manager, Ma Guoqiang still takes the cautious attitude to the steel later market, he said that there are a few of uncertainties in H2 macro-surroundings and steel market, the domestic steel demand growth will slow down, the imbalance in supply & demand will emerge, as the decline in domestic demand and the adjustment in export tax rebate policy will hold down the export volume, the domestic steel price will endure slack pressure in short-term.
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| Directory of China Metal Companies is an online database designed to provide detailed information on major metal companies in China with their business, products, contacts, as well as links to home pages. With this Directory, you can easily find available partners and new business opportunities in China.
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