Critical Strategic Metals
The Mission of the Critical Strategic Metals Web Site is to serve as a monthly compass for those who take a fundamental view of investment regarding the Molybdenum, Manganese and Magnesium metals markets, are concerned with the emerging critical under-supply of these strategic metals to Western nations and wish to profitability chart their course.
Chinese demand keeping world steel market red hot
The World Steel Association (WSA) reported an increase of 35.7% in the April 2010 year-on-year global steel production. Of the 122 million tonnes produced globally, China accounted for 55.4 million tonnes – the country’s highest in a single month.
China retained its position as the world’s largest steel producer and consumer. Most mills are returning to pre-downturn production capacities and the WSA’s April 2010 crude steel capacity utilization report shows an increase of 18.9 percentage points over April 2009.
In spite of the surplus production, steel producers are reluctant to implement any significant price cuts despite pressure from traders.
However, in early June, the Indian market saw a fall of $43–65 per tonne in the prices of flat steel, which is used in the white goods and automobile sectors. The drop was in response to China’s tightening policy and the euro crisis. An Indian steel maker said that while the demand for cold rolled steel is still high, the demand for galvanized steel is pretty low.
Another added that both the import and domestic prices of hot rolled coil (HRC) are now at par.
China’s Shanghai Baosteel Group Corporation has announced a 10% cut in July prices. There are reports of possible capacity cuts by Chinese steel makers in July in the face of weak demand and high costs, but there appears to be no indication of any other significant price cut in July.
According to a Credit Suisse report, the demand for steel in China and India are at pre-downturn levels. In fact, China expects to see an 8–10% hike in steel consumption this year.
On the other hand, certain global steel majors have increased their July prices. South Korea’s Posco intends to implement a 9% hike in the benchmark HRC prices, while Japan’s JFE Steel Corporation has already announced a price hike of $110 per tonne in special wire rods for the July–September period.
China’s steel production costs have, however, risen sharply because of the rise in imported iron ore prices. The former low-priced iron ore inventory has been used up. In fact, the costs of production and sale are almost equal now.
Further, iron ore giants such as Rio Tinto and Vale have announced higher prices and average iron ore prices are expected to increase by 30–35% in Q3 2010. If the cost of electricity, coke and salaries similarly rise, there is bound to be an increase in production costs in the short term, which is, in turn, bound to drive steel prices upwards.
Source: Critical Strategic Metals
