WSD: Global iron ore spot price may fall this summer
World Steel Dynamics (WSD), the world-famous steel information service provider, said that the speed of iron ore flowing into China is decelerating, and China’s domestic iron ore output is hiking. With the declining demand from China, the price of iron ore on the international market may go down this summer.
Peter F. Marcus, managing partner and analyst of WSD, said that massive investments worth about RMB 40 billion were made to develop mines in China in an effort to cash in on the rise of iron ore price. Despite the fact that domestic mines mainly provide lean ore, it also brings higher profit than that from imported iron ores after being refined into iron concentrate fines.
WSD predicted that the annual output of domestic iron concentrate fines will hit 410 million tons this year. The supply and demand tension will not be seen in China unless Chinese high-cost iron ore developers are kicked out of the market due to a global price fall. Under this situation, iron ore exports to China will decline, and the global iron ore price may drop this summer. After the wild price surge of 65 to 71% in 2008, the one-year international contract price may slide in 2009 with a predicted rate of 20%, according to the sources.
Marcus also said that WSD had listed China as one of the five countries (including Japan and EU) that most unsuitable for establishing new steel plants. He said that rising labor costs due to surging consumer products price will undermine the attractiveness of China’s work force. The slowing pace of investment on fixed assets, water shortage and price rise of natural gas, coal and domestic transportation would also be the contributing factor to the higher perceived unattractiveness.
WSD predicts that India would be the biggest rival of China in the global steel market because of lower costs and a better geographic position for exports.
Tags: exports, investment, iron-ore