China’s Iron and Steel Association is sayingthat steel mills are not buying iron ore.
“In my personal opinion, the price of imported iron ore will fall further, because the trends for the whole sector are unlikely to get better and steel mills don’t dare to buy ore,” said Zhang Changfu, the vice-chairman of the China Iron and Steel Association.
Lack ore buying in China mean’s that inventories are high there implying that steel is not being produced.
China’s Baoshan Iron & Steel Co confirmed the ore pricing downtrend by saying that there may eventually be iron ore oversupply.
“I expect the current tightness in iron ore supplies to ease by around end-2012 or 2013. The market may even reverse to be oversupplied after a flurry of mine investments,” Baosteel General manager Ma Guoqiang said during an online results briefing.
Baoshan “results” were rather bad registering a 51% drop in profit for its Q3.
As for Chinese steel profits in general, news agency Xinhua reports today that most of the profits these firm made this year do not come from their steel operations but “largely came from the companies’ mines, power plants and investments rather than steel business”.
“The companies’ average rate of profit in selling steel products was only 2.99 percent in the period, significantly lower than that of the country’s other sectors,” says Xinhua.
In Europe, steelmakers are looking at a substantial slowdown as recession takes hold there. Swedish specialty steel maker SSAB said on Friday it faced an uncertain outlook for prices and demand. Several steel mills have already been shit down in Europe.
Korea’s POSCO is has also issued a gloomy outlook saying that their profits will be down and steel prices will decline.
Last week, Japan’s Nippon Steel and JFE Holdings slashed full-year expectations by 20%.
In the US, Nucor Corp and U.S. Steel warned of weak demand for the remainder of the year.
“I’m rather cautious on steel in 2012. I see lower demand from the automotive and construction sectors and only growth in engineering,” said Ingo Schachel, analyst at Commerzbank.
Another steel input commodity, coking coal, may also suffer as a result of this global shave-down on steel. Last week, a sign that coke is entering into trouble has been noted by the Czech coal miner New World Resources (NWR) which sees dropping prices and demand. NWR has slashed its sales forecast by over 20% saying that they will not be able to sell the planned 720,000 tons of coking coal in 2011 and now expect between 525-575,000 tins.
Yet in Brazil, the message is different.
Iron ore producer, Vale says it plans not to reduce iron ore output and says that recent price drop is a blip.
Brazil’s steelmaker CSN also believes that they will sell more iron ore and steel in 2012.
“Their [CSN] estimates for next year look too optimistic. There are serious downside risks for both ore and in the months ahead,” said Pedro Galdi, head of research with SLW Corretora in Sao Paulo.
More evidence about prospects of steel will come this Thursday when ArcelorMittal reports its results. ArcelorMittal produces 7% of global steel so what they say would be very important.