LATEST NEWS Steel
February 4, 2010
China’s steel producers losing battle to get reductions in iron ore prices
China is pressing to turn its status as the world’s biggest steel producer into clout over global miners and cheaper iron ore prices. But its tactics failed in 2009 and there are few indications it will fare better this year.
In a sign of the limits of China’s growing economic might, months of price talks last year broke off without the price cuts demanded by Beijing, and tensions were heightened by the arrest of four Rio Tinto employees on spying charges.
Chinese mills wound up paying the same price as Japanese and South Korean producers —or more because they had to buy on the spot market where prices often exceed the contract rates.
This year, China’s steel industry faces difficult odds as it tries again to get a better deal.
Steel demand is surging as the government’s stimulus spending feeds a construction boom and Chinese consumers snap up more cars, appliances and other goods. The country’s mills are expected to churn out as much as 640 million metric tons of steel this year compared to about 570 million metric tons in 2009, when China produced almost half the world’s steel.
As production has shot higher, so have prices for iron ore, the key material in steel. Since last year, ore prices have nearly doubled to more than $120 a metric ton on the spot market.
China had hoped to be in a stronger bargaining position this year by consolidating its sprawling industry to present a unified front against the three big mining companies, which control most of the world’s iron ore supplies.
But the industry has yet to undergo a big enough restructuring. That’s left too many mills to cut their own deals with miners or boost production without paying heed to the government’s industry goals.
“The suppliers are concentrated and the buyers are fragmented, so it makes it difficult for China to have bargaining power,” said Helen Lau, senior research analyst at OSK Securities in Hong Kong.
Nor can China go around the major ore producers, Anglo-Australian miners Rio Tinto Ltd. and BHP Billiton Ltd. and Brazil’s Vale SA.
Its own reserves scattered without enough high quality ore, China has become increasingly reliant on foreign supplies. Mills imported some 72 per cent of their iron ore last year, an all-time high and up dramatically from 33 per cent a decade before, according to a report by Umetal, a Beijing-based research group.
|MOST POPULAR STORIES|
|TODAY’S TOP CONSTRUCTION PROJECTS|
These projects have been selected from 470 projects with a total value of $6,376,918,947 that Reed Construction Data Building Reports reported on Wednesday.
$104,727,250 Toronto ON Tenders
$50,000,000 Markham ON Tenders
$25,000,000 Toronto ON Prebid
- VIDEO: Economic Update May 21, 2013
- Future tradespeople put to the test
- Ontario raiding season closes with a thud
- Bird flags challenges in Canadian construction
- Ontario commits to Hwy. 427 expansion
- GO Transit to build new maintenance facility in East Gwillimbury
- Ancient First Nations site damaged during work by BC Hydro
- Federal NDP leader speaks to police 'to help' with Quebec corruption probe
- Construction Site Arson
- VIDEO: Journal of Commerce Update for the week of May 27th, 2013
- Historic church renovation reaches new heights
- Hiring of foreign workers for hospital project outrages union
- Acetylene torch explosion causes significant damage
- Festival of Architecture hits Halifax
- Winnipeg Southwest Transitway wins award
- Vendor performance is key measurement
- NDP leader spoke to police about corruption
- Big contract down under for ATCO Structures
- RFQ issued for Kamloops hospital project
|ALEX’S ECONOMICS BLOG|
Reed Construction Data Canada’s Chief Economist Alex Carrick discusses current developments in the North American economic environment with emphasis on the construction industry.
- An Overview of Prices and Sales in the Diverging U.S. and Canadian Housing Markets (April 25, 2013)
- Canada’s Precarious Dependence on the Commodity Price Super-Cycle (April 22, 2013)
- Twenty major upcoming residential and transportation terminal construction projects - April 2013 (April 15, 2013)