Throng of Chinese iron ore miners suspend production
Shanghai. November 30. INTERFAX-CHINA - About half of China's iron ore miners have suspended production in the face of dwindling profit margins due to the low price of imported ore, an analyst told Interfax Nov. 30.
Import prices fell some 30 percent in October, encouraging steelmakers to buy up the higher quality foreign ore and putting pressure on domestic miners, said Zhao Peng, analyst with industry consultancy Lange Steel.
The price of dry domestic iron ore grading 66 percent in Tangshan City on Nov. 30 was RMB 50 ($7.88) higher than the average reference CIF (cost, insurance and freight) price for Indian iron ore grading 63.5 percent, according to Mysteel figures.
Iron ore grading 66 percent (wet) in Tangshan is priced around RMB 950 ($149.65) per ton at present, but domestic miners need a price of about RMB 1,000 ($157.52) to break even. About half of domestic miners, mainly small and medium-sized firms, have consequently ceased production, said Zhao.
The production suspensions come after China's iron ore miners raised output in the first three quarters this year in line with climbing prices, with 66-percent wet ore hitting RMB 1,230 ($193.76) per ton in Tangshan at the end of September. Domestic output grew 24.5 percent year-on-year during the period to reach 946.23 million tons, according to the National Bureau of Statistics (NBS).
The global mining giants have adopted a more cautious outlook on prices next year. Jose Carlos Martins, strategy director for Brazil's Vale SA, earlier predicted prices could bottom out at $120 per ton, much lower than this year's average of $165.
BHP Billiton has turned more bearish on the outlook for commodity markets, citing tighter access to credit and trade finance among customers.
Rio Tinto warned this Monday that negative customer sentiment has increased in the face of global uncertainty, the latest sign that a demand-led recovery in commodity prices isn't likely anytime soon. The miner took a more positive outlook on China, where it expects demand to double by 2020 compared to 2008.
Meanwhile, Australia's Treasury Department has taken a brighter view on China's iron ore demand in the short-term. "While European demand is likely to remain lower than normal for some time, Chinese demand is expected to pick up in the near-term as steel mills restock in the lead-up to winter," it said.
- KHM