“Steel prices had plunged to the level of 1994. Winter is coming, indicating that spring is not too far away.” Qi Xiangdong, vice general secretary of China Iron and Steel Association (CISA) expressed.

Data from CISA shows that in Jan.-Nov., China produced 462.96 million tons of steel products, up 2.6pc over the same period last year, while the growth dropped back 14.1pc year-on-year. In Nov., China produced 35.9 million tons of steel products, down 4.97 million tons and 12.4pc from the same period last year.

Steel production showed unprecedented rapid decline in Sept.. In June this year, the daily steel production scored the historical high of 1.5648 million tons, equivalent to the annual production of 573 million tons. The daily steel production dropped to 1.3205 million tons in Sept., equivalent to the annual production of 482 million tons, while the average output fell to 1.1581 million tons in Oct., equivalent to that of 423 million tons a year. In Nov., the daily output plunged to 1.07 million tons, equivalent to that of 393 million tons per year.

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According to the investigation and analysis of operators and insiders, construction steel market of 2009 shows an air of expectancy, stabilization and slight fluctuation will be the essential characteristics.

This year, domestic construction steel market suffered shaken changes, prices continuously ascended and descended. In the first half of the year, the whole market warmed up in series, prices sharply soared, thereinto, prices of ┆6.5mm high-speed wire rod and ┆20mmケ deformed bar once respectively inclined to 5,850 yuan per ton and 5,535 yuan per ton, correspondingly boomed 1,350 yuan per to and 1,050 yuan per ton when compared to the end of 2007. However, when entering the second half of the year, the good situation suddenly turned, prices significantly descended and presented an irrigational sharp drop situation, while some ordinary deformed bar price plunged to 3,000 yuan per ton in October, showing a rare phenomenon.

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The global iron ore negotiation price-fixing system began in 1981 and it has been for 28 years till now. The benchmark price-fixing system was held in the fourth quarter every year, in which the world’s major iron ore suppliers made negotiations with other major customers to decide the next year’s iron ore FOB price, and if any one supplier reached the iron ore contract with steelmills, the others should accept the negotiation result.

Principles of traditional iron ore benchmark pricing system
Ⅰ. The price reached in the first round of negotiation will be accepted by the rest rounds of negotiation and became the standard price-fixing for the whole year, in which, buyers will not purchase from other sellers with higher price in the future negotiation and sellers will not sell to the buyers with cheaper price too.

Ⅱ. The same product variety only has one price rising standard, that is to say, they only set the price rising for the various varieties of products, not considering the different price rising for the different quality of the same variety. Every variety only has one price rising standard in the five- year straight negotiation from 2003 to 2007, with the exception of Vale’s BF pellet ores.

Ⅲ. Iron ore price was set by FOB price, not including ocean freight and other charges, for more visit: chinametalbiz.com

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Qi Xiangdong, the executive vice general secretary of China Iron & Steel Association (CISA) expressed on Dec.6 in Shangshai that since the third quarter of this year, China steel output notably tumbled, prices extensively plunged, more and more enterprises got losses, the whole industry faced severe challenge, and nearly 60pc large and medium steelmills operated in the red, in addition, next year, China steel production should pay attention to the pushing effects produced by macro economy and the direct and indirect export level of steel products, and actively tackle the challenges in accordance with market change.

Steel industry presented an unprecedented rapid-rebound situation since Sept.
Qi expressed that since entering New Age, with the accelerating of global economic recovery and domestic industrialization process, Chinese steel production kept high growth for seven consecutive years, crude steel can averagely grow around 20pc per year from 2001 to 2007, however, since September this year, steel industry presented an unprecedented rapid-rebound situation, while the lowest monthly output was 14.8mln tons lower than the highest point.

The latest statistics data provided by Qi Xiangdong showed that, when compared to the same period last year, profit of domestic 71 large and medium steelmills slumped 0.93pc in the first ten months this year, among which, that respectively sank 19.44pc and 72.9pc in August and September, in addition, 42 of 71 steelmills made a loss of 7.77bln yuan in October.

According to the analysis of Qi Xiangdong, the substantial reasons that lead to steelmills’ negative profit were the poor demand, sharply descendent steel price and high-level cost, what’s more, domestic steelmills’ sales profit rate was 5.58pc from January to October, but dropped to -3.23pc only in October, appeared a significant fallback situation for more visit: chinametalbiz.com

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In November this year, the financial storm caused by US credit crisis kept expanding, which shook the global economic structure. The impacts on real economy intensified. Data released by US Department of Labor showed that the CPI index in US fell 1pc in Oct. from the previous month, the largest decline within recent 61 months. The report from US Department of Commerce revealed that new houses being built plunged by 4.5pc in Oct., the lowest since 1947, which indicate the serious economic slump in US.

The monthly investigation from European Commission showed that the integrated prosperity index in Euro zone dropped from 80.0 in Oct. to 74.9 in Nov., the lowest since Aug., 1993 and far below than the prediction of 78.0 from economists.

Nations like Japan, South Korea and India, etc. fell into the same economic recessions. The latest report from IMF pointed that global economic fell into downturn, and the export increase from Asia shrank drastically. Meanwhile, the economic growth will slow down sharply. Therefore, the expectation of GDP growth in 2008 and 2009 on Asia was reduced to 6pc and 4.9pc respectively from chinametalbiz.com

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In recent one week, in Shangshai and its surrounding market, construction steel demand, such as deformed bar (debar) and wire rod seems appearing an operating situation of reconditioning and price comeback, the exchange becomes more active than previously, traders’ sales soars to some extent and hold an optimistic view on latter market, however, some uneasiness still lurks in some operators’ mind.

Liang Taigeng, the general manager of Shangshai Hualei Enterprise Development Co., Ltd expressed that debar price still had a fluctuant and rebounding process within this year, so it was difficult to apparently jump.

According to the market investigation from Shangshai Hualei, debar price in Shangshai market began to rebound from the bottom when entering mid-November after suffering a continuous fluctuation and comeback, and slightly fell back this week and was generally higher than that in Beijing and Tianjin market, from chinametalbiz.com.

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CR plate market showed no indications of recovery with continuously price decline in recent days and merchants were pessimistic about later market. However, analysts predicted that the price decline of CR plate will probably not stop in a short period but will slow down and turn to be stable.
According to market research, price of CR plate in Shanghai kept decreasing last week, with the average decline at 200 Yuan per ton. This is the same with markets in other areas. For example, the price fell 150-200 Yuan per ton with one week in Hangzhou city and Jinan city. Besides, the price decline trend was so string that there seemed to be no indications of recovery with poor transactions and strong wait-and-see attitude. Merchants predicted that price decline will continue so they dared not to increase inventory as demands remained decreasing.
Because market resources kept increasing, which intensified the contradiction between the supply and the demand, some analyst denoted. News from steel enterprises showed that CR plate inventory remained high which caused great pressure. Steel enterprises are eager to sell even at low prices to speed up inventory delivery, which affected spot price directly. For example, the current price of 1.0mm CR plate was only around 3,750-3,950 Yuan per ton in east China, down 150-300 Yuan per ton. It’s from chinametalbiz.com.
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With the approaching of the iron ore negotiation, it becomes expecting whether domestic steel enterprises could break through the restrictions from international iron ore giants. What worries steel industry is that under the circumstances of global economic slowdown, high-costs and low downstream demands, the potential risks and difficulties in profit making become intensified in steel industry. Therefore, the reorganization and industrial concentration of has become a new focus in steel industry.

Statistic data from China Iron and Steel Association (CISA) showed that in Jan.-Aug., production costs of domestic steel enterprises soared 60pc, while domestic steel prices started plunging since July with demand decline continued. By October, over 60pc of large and medium steel enterprises were in profit losses, while the deficit had reached 1.154 billion Yuan in Jan.-Sept. this year, 18.06 times up over the same period last year. As the steel production capacity exceeds that of the demand, steel enterprises with poor management will be forced to shut down or restructured and only by the reorganization with enterprises that have secured resources, advanced technology and equipment and stable market could they get rid of the eliminated destiny.

An official from State-owned Assets Supervision and Administration Commission (SASCC) expressed the same opinion “The time for the survival of the fittest in steel industry has arrived. The reorganization by the government promoted little as steel industry was always in fine condition. But now the market will show its huge power.” From metalbiz.com

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With the approaching of the iron ore negotiation, it becomes expecting whether domestic steel enterprises could break through the restrictions from international iron ore giants. What worries steel industry is that under the circumstances of global economic slowdown, high-costs and low downstream demands, the potential risks and difficulties in profit making become intensified in steel industry. Therefore, the reorganization and industrial concentration of has become a new focus in steel industry.

Statistic data from China Iron and Steel Association (CISA) showed that in Jan.-Aug., production costs of domestic steel enterprises soared 60pc, while domestic steel prices started plunging since July with demand decline continued. By October, over 60pc of large and medium steel enterprises were in profit losses, while the deficit had reached 1.154 billion Yuan in Jan.-Sept. this year, 18.06 times up over the same period last year. As the steel production capacity exceeds that of the demand, steel enterprises with poor management will be forced to shut down or restructured and only by the reorganization with enterprises that have secured resources, advanced technology and equipment and stable market could they get rid of the eliminated destiny.

An official from State-owned Assets Supervision and Administration Commission (SASCC) expressed the same opinion “The time for the survival of the fittest in steel industry has arrived. The reorganization by the government promoted little as steel industry was always in fine condition. But now the market will show its huge power.” From metalbiz.com

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Hot-rolled coil price dropped once again after the National Day holiday affected by the sluggish downstream demand and price reduction of steelmills. The market price of hot-rolled coil in Shanghai rose to 5900 Yuan per ton in early July from 4700Yuan per ton in the beginning of this year then dropped significantly later and dropped all the way to 3200 Yuan per ton in middle Oct, dropped by 45 percent. The price predicted to rebound in Nov.

It is predicted hot-rolled coil price reached to its lowest at present and it is not likely to drop further later, but it takes long time for steelmills to digest its huge inventory. Therefore, hot-rolled coil price will only to rebound in short period and will be seeking price balance for Nov. It’s from ChinaMetalBiz.com.

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