Reporter discovered that the three big miners, by controlling the shipment of iron ore adopted public bidding for spot cargos to maintain the firm prices making steel mills hard to gain more profits given the steel prices eyed serious drops and most mills hold bearish views for later market.
An industry insider told Economic information daily that “The three big miners adopt public bidding for iron ore shipment, encouraging traders and mills to push up the prices and preventing the prices to drop.”
The source said the despite many market players anticipated the prices to fall to around USD 170 a tonne, the recent bidding results surprised them. The iron ore market in the previous two weeks was bearish, but one shipment of 63.5% Newman Fines by BHP was concluded at USD 174.5 a tonne recently.
As data from Mysteel revealed that the more troubling news was that with the domination place the three big miners hold, the public bidding continued to push the offer to go up. As of July 8 the Indian 63.5% fines was offered at USD 180 a tonne.
A source form mill told reporter that “A few months ago, many mills started purchasing more domestic iron ore, in order to lower cost, and with the steel prices keeping firm at that time, mills gained some level of profits, but the steel prices started to fall recently and when we all expected the iron ore prices to drop, but the bidding kept the prices at the high level, we might struggle in the second half year.”
Source from China Iron and Steel Association said the as Chinese steel mills have high dependence on the imported ore and the prices are likely to maintain at a high level and see slight chance of sharp decline, the raw material prices in H2 continue to remain at high level.
Mr Xu Xiangchun chief analyst with researcher Mysteel.com said “The key factor that influences steel industry in H2 is the output.”
He expects the steel industry is likely to see recovery in H2 as iron ore prices have adjusted from high level position and business environment for steel industry seemed improved, but one should pay close attention toward the record steel output.
Mr Xu suggests steel mills balance output as increased output would result in more demand for raw materials and the three big miners will use this signal to raise iron ore prices, pushing Chinese mills hard to increase profits. On the other hand, he advises more steel mills should going out for more overseas mineral resources, increase self-interested ore supply and diversify channels for imported iron ore.