19 Jan 2010 06:51

China's crude steel output to hit 590 mln tons in 2010 - UBS

Shanghai. January 19. INTERFAX-CHINA - Union Bank of Switzerland (UBS) expects China's crude steel output to reach 590 million tons in 2010, up 4.42 percent from that of 2009, a senior UBS employee said at a press conference on Jan. 18.

"My prediction is lower than the current market expectation of 5 percent or 10 percent, as there are steel product stockpiles left over from the fourth quarter of 2009, due to speculation and front-loaded contracts," Hubert Tang, director of UBS' Equities Research department, said at the UBS analyst/economist session held in Shanghai.

Meanwhile, Tang expects China to start increasing interest rates to cool down the domestic economy from the second quarter of 2010 onwards, which will reduce the country's available credit and impact domestic crude steel production.

Tang anticipates that domestic steel product prices will continue to be strong in the first and second quarter of 2010, and then fall back to a relatively low level in the second half of the year, due to the country's tightening monetary policy.

Furthermore, Tom Price, a commodity analyst from UBS, said the 2010 benchmark iron ore prices, which are likely to be reached between Rio Tinto, BHP Billiton and Japanese steel mills, will rise by more than 20 percent from the 2009 price.

"The two iron ore giants have plans to expand their iron ore production capacity by 50 percent in the next five years, thus they may insist on a higher price in order to fund their expansion," Price added.