Daily Steel News - 15 Sept 10

East Asian traders expect stable steel prices for Q4
Steel prices are expected to stabilise in fourth quarter. With Beijing-directed electricity usage controls resulting in steel production cuts, Chinese demand for spot iron ore will soften, a chinese trader rationalises. Less steel supply will be offset by weak steel demand so steel prices will stabilise at current levels, he adds. Current price levels appear to be in equilibrium for both users and sellers, a Hong Kong trader tells Steel Business Briefing. He says this with reference to spot iron ore prices prevailing at $135-145/tonne, long-term contract iron ore settlement prices dipping by 13% in Q4 and hot rolled coil prices at around $600/t and more levels. Others say that steel production cuts in China are likely to be temporary because other Chinese mills will crank up their production in order to benefit from higher domestic steel prices. “The production cuts are good. They will help stabilise prices because China is overstocked now. But these cuts will be temporary,” says a Taiwanese trader who adds that the cuts have not been voluntary. Lower Q4 iron ore prices may encourage increased sales and stock-piling of raw material. “Scrap prices could fall because we expect the power cuts to have more of an impact on Chinese EAF operations and this will mean lower demand for scrap,” warns a manager with a Vietnamese longs steel mill. Traders cite the strengthening of many Asian currencies against the US dollar as a contributing factor to steel price volatility. “There are no longer any long term trends in the steel markets. The market has become very reactive and difficult to predict,” the Taiwanese trader adds.

Iron ore forward prices slip on Chinese steel output cuts
Forward prices for cash-settled iron ore swaps moved down in line with a slow physical market last week as the Chinese government moved to slow steel production to meet end-of-year energy saving targets. Brokers expect China’s output cuts to continue through the fourth quarter, impacting future demand for iron ore. Concerns over the extent of the cuts grew mid-week, while the market was further confused by mixed signals from steel futures on the Shanghai Futures Exchange (SHFE), widely watched by swap market participants as an indicator of Chinese steel market sentiment. A slow physical iron ore market and holidays in Singapore on Friday 10 September further dampened swap market activity. The TSI reference price for 62% Fe fines, used exclusively to settle swap contracts on the Singapore Exchange (SGX), LCH.CLearnet and CME, was down 3.1% last week, as Steel Business Briefing has reported. The September swap on the Singapore Exchange (SGX) slipped by around $4/t between Friday 3 September and the end of last week, closing at $131.13/t on 10 September. The October swap declined by a greater amount, falling by almost $7/t over the same period to close at $130.5/t. The market opened quietly this week.