Reuters reported that cut in iron ore prices agreed by Rio Tinto and mill may have the opposite impact on steel product prices, buoyed by the removal of cost uncertainty and reluctance of Chinese peers to accept the deal.
The long overdue deal after months of fraught negotiations may allow world No 2 mill Nippon Steel and its peers to hold the line against further steel product price cuts with major customers such as Toyota Motor, supporting margins in one of the industries hardest hit by the recession.
Ms Kim Hyun tae a Hyundai Securities analyst said that "Steel prices have bottomed out and the iron ore deal will take some pressure off steelmakers to cut prices further. But prices won't be able to stage a strong recovery, given that it would take some time for overall demand to fully recover."
Ms Song Shen analyst of Goldman Sachs said that "It (the Rio/Nippon deal) removes one of the overhangs on steel prices and gives cost support. The less than-expected iron ore price drop would require a higher steel price rebound to be passed on.”
Mr GJ Kim Samsung Securities analyst said that "The deal removed the last bit of uncertainty that has haunted steelmakers but steel market recovery depends heavily on China whether they continue to produce more steel and put pressure on prices again.’