Scrap Monster: The imported iron ore market in China is set for a correction this week, according to a new opinion poll conducted by Umetal among 30 domestic steel mills, 50 iron traders and 20 suppliers on imported iron ore market trend.
The survey found that 60% believed imported iron ore market would be stable with small fluctuation, 30% said the market would go down and the other 10% thought market would climb. To a question whether imported iron ore prices will go up or down, or just remain stable with minor correction? , ten percent of respondents said it will go up by 10%, while 30% said it will go down; 60% said ti will be range bound.
Meanwhile, news reports indicated that Chinese small blast furnances have stopped using imported iron ore due to higher costs that erode their margins. More and more China steel makers may opt not to import iron ore if margins are depressed, according to China Iron and Steel Association.
A Hebei-based steel company opted to purchase 40 percent of ore from the domestic market compared with 15 percent in 2010, said a sales executive at the company. Hebei Iron & Steel Group said last week that its first-quarter profit fell 3 percent on higher raw-material costs and increased competition, a recent report said.
According to Umetal there are some favourable factors that will support imported iron ore markets:
-- The east coast of India will be under an embargo starting end May, and low-grade iron ore supply is expected to decrease by then, which will give a certain support to iron ore prices;
-- Imported iron ore prices remained strong this week, while traders are not willing to reduce their offers because of previously high procurement costs.
Unfavorable factors
-- Steel billet market in Tangshan are remaining sluggish in spite of price rise which is not accepted by market, so some traders cut down their prices to stimulate transactions;
-- Most steel mills have relatively abundant stocks of iron ore, so they are not active in purchasing;
-- The rebar futures market is weak and has difficulties in going up, and so does the spot market.
-- Anticipation of interest rate increase further strengths, which contributes to an unfavorable condition.