Even though China feasts during the Golden Holidays all is still in the steel market. Iron ore levels after registering a 17% improvement in iron ore prices since Ist week of September it hit a plateau over the last couple of week before the holiday.
Stocking abated on the eve of holiday as mills postponed buying after the break. Even though the daily crude steel production dipped marginally during 10-20th September major large and medium steel enterprises producing 1.52millon tonne of crude steel on a daily basis down by 2.73% from the previous 10 days. It is estimated that China’s average daily crude steel output reached 1.857 million tonnes in mid Sep, down by 2.01%. But the production raging much ahead of the desired levels in the backdrop of nearly 16 million tonnes of finished inventory.
Crude steel production for the year is expected to end at 713 million tonne Yoy growth of 1.5 %. Total steel capacity in China has reached a preposterous level of 900 million tonnes.
Silhouetted against these towering figures it is unlikely that the buying will abate in China although it might encounter momentary dips owing to economic headwinds.
Reportedly the iron ore stock at the ports is 94.68 million tonnes down by 1.51 million tonnes from the previous week. Mills would open buying after the holiday as the higher grade ore are in shortage. Moreover the price having plateau recently it would be prudent to buy before it picks up on year end demand.
Gains in prices of iron ore forward swaps this week suggest spot rates could rebound when top consumer China returns next week after a holiday.
Traders expect Chinese steel mills to replenish iron ore inventories after the October 1st 2012 to October 5th 2012 Golden Week break, with domestic steel prices slowly on the mend, and the country's steel production staying high.
However the prices are unlikely to recover back soon to the USD 120 zone, a level last seen in July 2012, unless China's steel demand bounces back significantly.
Source - Strategic Research Institute
(www.steelguru.com)
