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Iron ore prices rising more than steel

08-19-2010 09:32 BJT

The rising price of iron ore has been troubling China's steel industry. Although steel prices have recently rebounded, the cost of iron ore is increasing faster. And China's domestic market can't keep up.

Since mid July, spot prices for steel products have risen by between 8 and 12 percent. But also on the rise is the price for imported iron ore.

High-grade iron ore imported from India has jumped by over 20 percent, from 123 US dollars per ton to 156.

Liu Qiuping, Chief Analyst of Xiben New Line Stock Co. Ltd. said "The price jump is mainly caused by steel makers' need to refill their storage. Meanwhile, India's alleged ban on iron ore exports also had some impact."

Steel mills are waiting for September and October when steel consumption will see its annual rise. That's why they're refilling their storage.

But an even bigger rebound in the price of raw materials has changed market forecasts.

Liu Qiuping said "Generally speaking, when the price has been pushed to over 150 US dollars per ton, market demand will no longer be a driving force and people will rather wait and see."

Figures from customs show imports of iron ore have been decreasing month on month since March this year. That's caused by a stubbornly high raw material price and decreasing domestic production.

Huang Shuai, Senior Analyst of Orient Futures said "We found that in the process when the price of raw material has been rising, demand is actually being curbed. China's imports of iron ore will continue to decline in future. That will lead to a fluctuating decline for the price of iron ore."

The General Administration of Customs has issued a warning to steel manufacturers... they'll face a much tougher business environment as the three mining giants, BHP Billiton, Rio Tinto and Vale use more financial tools to price iron ore.

Editor:Xiong Qu |Source: CNTV.CN

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