Chinese steel melts on global slowdown

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

28 Nov 2008

The dwindling material costs and government's economic stimulus package might not work wonders for the nation's flagging steel industry as the demand for the metal has shrunk considerably due to the economic downturn, analysts said. "Steel and iron consumption will keep slowing down for the next three to six months at least," said Becky Yuen, a research analyst at Daoheng Securities. "Even companies that need steel products would make the best of their stockpile and will not be in a hurry to purchase."China, the world's biggest steel producer and consumer, will see its steel production flat in 2009 or risk falling further, Citigroup said in a research report. The volume of Chinese steel exports in 2009 is expected to plummet substantially, given the global recession, Jing Ulrich, managing director of China equities at JPMorgan, wrote in an e-mail to China Daily.
Although cash prices of iron ore imported by China have tumbled 62 percent since May and coal prices have slid substantially over the last few months, steel makers couldn't translate the lower production costs into higher profit margin, according to Beijing Antaike Information Development.
Domestic steel prices have slumped more than 35 percent from their peak in June and most steel mills were operating at a loss.
"Spot iron ore prices have fallen below contract iron ore prices, which indicates how warm the market becomes," Yuen said.

Source: Alibaba.com