Daily Steel News - 28 Jul 2009

Rebar price hike making Chinese construction firm nervous
Shanghai Securities News reported that rebar prices advance successively steel users begin to worry about the supply. The demand of rebar in spot market has been driven into an unparalleled level by the lately started large infrastructural constructions and the improving operations in real estate sector. And some small steel user worries about the short of rebar supply in Q3 midseason of constructions. Under this situation, some small steel users turn to futures market to ensure the purchasing. As learned the number of registered cargoes gradually increases and the rebar stocks of Shanghai Futures Exchange firstly outnumber 10,000 tonnes this week. Small users tend to deal with future delivery since the minimum tonnage in the delivery is only at 300 tonnes fit for small trades. Prices for the futures contracts in Shanghai Futures Exchange all went up recently that for dominant contracts continued to break down records this week. The survey shows that spot prices for main rebar are traded at CNY 4093 per tonne to CNY 4456 per tonne and the average prices for futures delivery are at CNY 4100 per tonne to CNY 4269 per tonne. To sum up rebar prices are expected to head up both in spot and futures markets. Mr Xiong Zheng GM of Shanghai subsidiary of Soochow Securities said "Rebar prices bubbles up mainly due to the hot downstream demand." Government huge investments have brought in lots of demand of rebar which fears small users that they will be hard to let in rebar in the incoming midseason. Many small traders support the thought of buying future contract, when mills always give priorities to large steel consumers. Mr Wei Bin director of steel department of Shenyin Wanguo Future said "It's feasible for them to absorb products from futures market." If small agents want successful futures delivery there must be cargos in the depot and the depot should not be far from the agents. At present, the total storage capacity of rebar referred to Shanghai Futures Exchange is at 3 million tonnes including 0.54 million tonnes in Shanghai, 1.47 million tonnes in Jiangsu, 0.39 million tonnes in Zhejiang, 0.6 million tonnes in Tianjin. However the registered cargos are a bit few at present. Expert said that it needs more mills and traders to take part in the businesses.

Chinese iron ore importers look beyond traditional suppliers
Combined imports of iron ore from China's main supplying countries . Australia, Brazil and India . dipped slightly in June, Steel Business Briefing learns. According to Chinese customs statistics, imports from these countries amounted to 44.2m tonnes, 79.9% of China's total imports of 55.32m t. In May, iron ore shipments from these countries were 82.7% of the total. During the first half of this year, China imported 121.62m t of Australian iron ore, up by 42.93% from the corresponding period of last year. Imports from Brazil rose by 20.43% to 60.83m t while Indian-origin ore rose by 10.12% to 62.49mt. The next three main iron ore suppliers to China in June were South Africa, Ukraine and Russia and imports from these countries grew by 48.4%, 16.9% and 12.7% respectively over May. During the first half of this year, China's iron ore imports from South Africa, Ukraine and Russia also recorded sharp increases (see table). Chinese buyers are eager to develop new iron ore supply channels, to reduce dependence on the traditional three major supplying countries and strengthen their bargaining power, a Shanghai-based iron ore trader tells SBB. His company is now looking for some iron ore supply from Iran for his customers. "Mills are more flexible now to try iron ore from various sources," he says. However, he also points out iron ore project investments in many countries are facing difficulties. This means China's dependence on the traditional ore supplying countries is unlikely to change in the short term.
China's imports of iron ore million t. (Source: China customs)
Jun 09 May 09 m-o-m Jan-Jun 09 H1 09/08
Australia 23.72 21.71 9.26% 121.62 42.93%
Brazil 12.21 13.6 -10.2% 60.83 20.43%
India 8.29 8.92 -7.06% 62.49 10.12%
South Africa 4.2 2.83 48.41% 16.61 98.74%
Ukraine 1.52 1.3 16.92% 5.61 98.01%
Russia 1.24 1.1 12.73% 5.37 76.77%

China domestic iron ore prices continue to rise
Chinese domestic iron ore prices have continued to increase from June levels, market sources tell Steel Business Briefing. The price of iron ore concentrates grading 66% Fe is prevailing at around RMB 640-650/wet metric tone ($94-95/wmt) in north-eastern China's Liaoning province, on an ex-works basis including 17% VAT. This represents a near 16% climb from mid-June's RMB 550-560/wmt. The price of 66% Fe iron ore concs in eastern China's Anhui province is around RMB 680-690/wmt on the same basis, up from June's RMB 660-670/wmt. Traders say that for some mills to turn to domestic ore now is quite understandable, as high grade imported ores are generally too expensive. Overall demand for ore among the mills is increasing given that China's monthly crude steel output has shown continuous rises since May. A Beijing-based analyst says although domestic ore prices are also rising, the rate of increase is not as sharp as for imported iron ores. The mills are unlikely to stock too much domestic ore under current market conditions because of the uncertainty of the imported iron ore price negotiations. "In the short term, unless imported ore prices collapse suddenly, domestic ore prices will probably continue to rise, supported by strong domestic steel prices," the analyst predicts. CISA statistics suggest China produced about 83.26m t of crude iron ore in June, up from 65.55m t in May. In the first half of this year, China produced about 379.9m t of crude ore, down by 4.8% year-on-year.

Doubt cast on talk of ore price settlement by 1 August
Disagreement has emerged among several Chinese steelmakers over comments attributed to Li Xiaowei president of central Chinese steelmaker Valin Iron & Steel Group and a CISA vice chairman . to the effect that the iron ore price negotiations may be settled by 1 August. Though Li apparently continued to insist that China would not accept the 33% price decrease decided between Rio Tinto and the Japanese mills in late May, his comments nevertheless received wide coverage in the Chinese media and caused a stir in the Chinese market. But steel sources contacted by Steel Business Briefing doubted the talks would be concluded within the ten days that Li indicated. A Baosteel official said he had heard nothing to indicate the negotiations will be completed soon. Indeed, he knew of no schedule set for the talks to reconvene. Nobody at Valin was available for comment. A northern Chinese mill official suggested that the talks had reached an impasse that was unlikely to be broken unless either the miners or mills presented some new proposals. "However, so far there is no evidence showing that either negotiating party is willing to concede ground," he says. The current rising spot iron ore market is also making the negotiations increasingly difficult for the Chinese side. "China should be in no hurry to achieve a price settlement when spot ore prices are reaching record highs. It's better to wait until the market is a bit cooler," a Beijing-based iron ore trader says.

Daily Steel News - 13 Jul 09

SE Asian importers are wary in firm billet market
Billet import prices are holding firm at $450-460/tonne cfr in southeast Asia. Some 50,000 to 60,000 tonnes of Russian-origin 3sp/ps billet for September/October shipment was booked at $450/t cfr Philippines during the week ending 10 July, trading sources tell Steel Business Briefing. A Taipei-based trader describes the supplier for this deal as "hungry for orders" and sold at this attractive price because
it was "looking for the quantity." Nobody is buying at a higher price "because there is little room for the rerollers at current domestic debar prices," a Manila-based trader explains. Russian-origin 5sp/ps billet is being offered at $460-470/t cfr to the southeast Asia region, Taiwanese material at around $10/t more. "Buyers will have to pay $460/t cfr if they want to buy billet today," a Vietnamese trader notes. However, many Vietnamese importers are cautious about paying these high prices. Those in northern Vietnam have raised their bidding price to $450-455/t cfr, up from the previous week's $440/t cfr but it is hard to find supply at this level. Some 20,000 tonnes of Russian 5sp/ps billet was booked at $465/t cfr Vietnam recently, another trader claims. He believes that prices are on the uptrend. Local importers will have to accede to high prices when they return to book material in some weeks' time, he says. However, a regional trader in Singapore disagrees, saying falling crude oil prices will soften commodity prices in general, and the strengthening of the US dollar against local currencies will adversely impact import demand for steel. He adds that mills appear to be more willing to negotiate over bids this past week.

Daily Steel News - 10 Jul 09

Rebar offer prices jump in Singapore
Suppliers of rebar to Southeast Asia have raised their offer prices to above $500/tonne cfr. "Mills are testing new acceptance levels of buyers now," a Singapore trader says. He says that quotes from mills range between $515 and $530/t cfr Singapore. Smaller Turkish mills can offer at $515/t cfr whereas Korean material is now offered at $530/t cfr. "All mills are asking for more than $500/t cfr now, because scrap prices are not coming down," another Singapore trader tells Steel Business Briefing. He says that booking quantities of 3,000-5,000 tonnes are small because less risk is involved should prices fall by the time the steel arrives. Korean-origin rebar was reportedly booked at around $495/t cfr Singapore last week. Many traders say that the market is not ready yet to accept these higher offer prices because local rebar prices have not risen as quickly in Singapore. Although the domestic price of rebar was raised by $20/t this week to the equivalent of $525/t delivered Singapore, there is insufficient room for margins for importers if they book at current offer prices, SBB is told.

Korean domestic scrap prices rise ahead of summer
After falling continuously for more than two months, ferrous scrap prices in Korea have begun to rise but only in certain markets. Korea's largest scrap consumer Hyundai Steel, together with other EAF steel makers, has raised scrap buying prices by KRW 20,000/t ($16/t) from early July in the country's south-east region encompassing Busan. Between end-April and end-June the Korean mini mills led by Hyundai cut their buying prices five times by KRW 10-20,000/t ($8-16/t) each time, blaming high scrap inventories at yards and upcoming deliveries of imported scrap, as Steel Business Briefing reported. "Subsequently, the volume of scrap arising has decreased and collection volumes seriously declined in the south-east area in particular. This is why Hyundai lifted prices this time," a local scrap dealer says. With the price increase, Hyundai's new buying price for Shindachi grade is KRW 320-340,000/t ($249-264/t), up from KRW 300-320,000/t at end-June. However, the new scrap prices are unlikely to firm over the longer term as most Korean steelmakers have scheduled shutdowns for annual summer maintenance from mid-July to August. "This price hike is only for temporary purchases because steelmakers want to maintain their scrap stock levels. However, the prices will fall again in about two weeks," the dealer adds. The three EAFs at Hyundai's Pohang works near of Busan . the 75 tonne, 80 t and 120 t units . will be halted for 7-10 days from 20 July and the other EAFs at its Incheon and Dangjin works are slated to stop 10-24 August, SBB understands.

Capesize freight rates sink on inactivity, easing congestion
Capesize freight rates have continued to drift downwards since last week, shipbrokers and traders tell Steel Business Briefing. The spot market for Capes has lost in excess of 25% of its value over the last week, according to Norwegian shipping firm Fearnleys. Congestion has eased slightly off China and Australia, releasing more vessels into the market. In mid-June 18% of the global Capesize fleet, 154 ships, was queued off Australia, Brazil and China, brokers suggest. There are now 71 Capes waiting to berth off Chinese iron ore discharge ports, down 17 from this peak, according to a London-based brokerage. Chartering interest from the three major miners has also stagnated as China's benchmark negotiations have dragged on, with rates in both the Atlantic and Pacific basins stalling. As a result there has been a slight rise in prompt tonnage availability. There has also been some cancellation of tonnage by China, which may allude to a slowdown in ore buying, one analyst says. Rates for Tubarão-China (Beilun/Baoshan) movements fell from $46.10/tonne on Tuesday 30 June to just above $36/t by 7 July. Tubarão-Rotterdam rates fell from $26.10/t to just below $25/t and West Australia-China (Beilun/Baoshan) shipments dropped over $3.50/t to $14.90/t. Queensland (Hay Point)-Rotterdam coal shipments slipped to $25.57/t yesterday, down $1.03/t day-on-day. The price of 62% Fe iron ore material delivered into China (CFR Tianjin port) has fallen $1.3/t over the last week to $76.9/t, according to The Steel Index, a subsidiary of SBB. Over the last month prices for 62% Fe material delivered into China have risen more than 13%, TSI data indicate.

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Steel scrap buyers and sellers – now’s the time for action
The Chicago Climate Futures Exchange (CCFE) and World Steel Dynamics (WSD) announced on June 22, 2009 the formation of World Steel Exchange (WSE) to list futures contracts, initially for steel scrap. The contracts will trade and clear on CCFE’s internet accessible trading platform and will be based on the SteelBenchmarkerTM family of price indices. The massive swings in steel scrap prices have created a new world of increased profits, greater risks, more stress and new opportunities for those in the steel scrap industry. The trading of futures contracts on the World Steel Exchange will give those involved in buying or selling steel scrap, steel products and steelmakers’ raw materials the opportunity to hedge the price risk. The WSE expects to launch its first contracts later in 2009. We invite you to participate in launching “the dawn of financial transactions in steel scrap prices” by becoming a regular twice-per-month steel scrap price assessment provider to our SteelBenchmarkerTM system. Steel scrap and steel product financial (or futures) transactions, in which there is no physical delivery or holding of inventories, is a development many people think about positively given the extraordinary volatility of scrap and steel product prices in recent years. While the need to hedge against steel scrap price volatility is unquestioned, the problem has been the lack of a mechanism to fulfill the need. A mechanism, such as trading on an exchange based on benchmark prices, seems the most promising in the United States given the size, breadth, liquidity and global influence of the USA steel scrap market. We expect a big interest in trading steel scrap futures from scrap buyers and sellers, domestic and foreign steel mills, steel buyers and sellers, traders and financial players.