It is reported that most steel mills are running at full throttle amid steel price drops because they are still marginally lucrative. However, market price is excessively higher than ex-factory prices.
In Beijing, the maximum price discrepancy is up to CNY 700 per tonne to CNY 800 per tonne. Therefore, dealers sell the products at low prices to recover capital because of expected interest rate rise and uncertainties in housing sector. Some steel mills promised to lower settlement price for May.
The China Iron and Steel Association said steel prices will continue to fluctuate. The association urged steelmakers to manufacture goods in line with market demand. Capacity cut for all steelmakers will hold off because of their specific conditions.
Rio Tinto has announced its Q2 term prices. The fine ore and ore lumps are priced at 193.68 cents per DMTU FOB and 217.68 cents per DMTU FOB respectively. That is to say, quotations of 63.5% iron content ore and ore lumps are USD123 per tonne FOB and USD138 per tonne FOB respectively. In addition to seaborne freights, Chinese steel mills will buy 63.5% iron content ore at USD135 per tonne for the second quarter of this year.
The Q2 prices are unbearable for steel mills. But the Q3 prices are likely to surge further as the three iron ore giants said they will lift the Q3 prices to USD 160 per tonne indicating narrower profits for steel mills.