The value of Australian iron ore assets has sunk by half over the past quarter, led by a decline in prices of the commodity. “We had valued the asset at $230 million, but now I don’t think we should pay more than half of that,” said a domestic mining company bidding for one of these assets. Chinese policies — phasing out of stimulus packages, hemming of the real estate sector and closing of obsolete units — are being blamed for this.
This has pulled down prices of raw material inputs. According to the World Steel Association (WSA) forecast, China’s apparent steel use growth has slowed and will fall further in 2011. “China’s apparent steel use in 2010 is expected to increase only 6.7 per cent to 579 million tonnes, after the strong increase of 24.8 per cent in 2009. While China showed an increase of 9.2 per cent in apparent steel use from January to August in 2010, it is forecast that its apparent steel use growth will slow considerably in the remaining part of this year due to the Chinese government’s effort to cool the real estate sector growth and the ongoing production control,” WSA said.
That’s one part of the story. The forecast for China is low compared to growth rates in other countries, but its apparent steel use in 2011 will still be 42 per cent above the 2007 level. China will account for about 45 per cent of world apparent steel use in 2011. Over the past quarter, iron ore prices have dropped by $6-10 a tonne to $145, while coking coal prices for the quarter have been at $205 a tonne, down by $10 quarter-on-quarter. India’s largest iron ore producer, NMDC, has lowered prices by about five per cent for the October-December period. If steel makers are to be believed, the softening is temporary. “China is shutting obsolete capacities and new capacities will come onstream in the next two years. We anticipate boom times will come back in the next two years as China will turn a net-importer,” said Uttam Galva Steels’ Director (Commercial), Ankit Miglani. Domestic flat steel makers recently increased prices by about Rs 1,500 a tonne.
“The internal demand is very strong, driven by auto, white goods, engineering and construction sectors. We don’t see prices going up during this quarter, but this is off-season,” Miglani explained. The India story remains intact. India’s steel demand is expected to grow 8.2 per cent and 13.6 per cent in 2010 and 2011, respectively, while steel use will be 32 per cent above its 2007 level next year.
Growth estimates
NewsWire18 adds: WSA has raised the forecast for growth in 2010 steel production to 13.1 per cent from its previous estimate of 8.4 per cent, as prospects of recovery in developed economies look brighter and demand continues to firm up in emerging countries. “This (the improved outlook) suggests a steady and stable steel recovery, and our current forecast does not foresee a double dip recession as feared by some,” Daniel Novegil, chairman of the World Steel Economics Committee said in a report.
Novegil was cautious of steel demand in 2011 as the recovery in most developed countries have so far been driven by stimulus measures and stockpiling. “Whether consumer and corporate spending will now pick up and continue the recovery momentum is yet to be seen. Recent economic indicators are giving us mixed signals and developments in the remaining part of this year and early next year must be watched carefully,” he said. World Steel projected 5.3 per cent growth in steel demand to 1.34 billion tonnes for 2011.
Source: Business Standard
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