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Chinese steel and iron ore futures slid more than 2 percent on Tuesday, retreating from recent two-week highs amid concerns Beijing's efforts to cool surging home prices would slow demand for steel.
China's eastern city of Nanjing said on Sunday it would restrict home purchases, the latest second-tier city to do so as the government tries to rein in home prices.
The average new home price in 70 major Chinese cities climbed an annual 9.2 percent in August, up from 7.9 percent in July, government data showed last week.
"The real estate curbs will not encourage developers to build new houses and it will eventually affect demand for steel," said a Shanghai-based iron ore trader.
The most-traded rebar on the Shanghai Futures Exchange was down 2.3 percent at 2,269 yuan ($340) a tonne by 0258 GMT. The construction steel product peaked at 2,353 yuan on Monday, its strongest since Sept. 12.
Rebar has fallen more than 6 percent so far in September, typically a brisk period for construction activity in China following the summer lull. But some traders say apart from the property curbs, rains in parts of the country have limited construction projects.
There was also limited appetite for steelmaking raw material iron ore, with the most-traded contract on the Dalian Commodity Exchange slipping 2.1 percent to 404.50 yuan a tonne. It touched a two-week high of 420 yuan on Sept. 22.
There is little appetite for mills to replenish iron ore stocks ahead of China's week-long National Day holiday that starts on Oct. 3, said the Shanghai trader.
"I think most mills have enough supply (of iron ore) or they don't have enough problem to secure supply for their immediate demand," he said.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI slipped 0.2 percent to $56.40 a tonne on Monday, according to The Steel Index.
Australian iron ore miner Fortescue Metals Group said it hopes strong demand from China will eventually help revive stalled talks with rival Vale SA about blending their ore in the world's top consumer of the steelmaking raw material.
The world's No. 4 and No. 1 miner announced in March that they were in talks to blend up to 100 million tonnes of their ore in China. The aim was to match the quality of the ore produced by rival Rio Tinto, seen as the benchmark in China, and win a bigger market share.
The talks have since slowed down significantly and "Vale has expressed that they are less enthusiastic at the moment", Fortescue Chief Executive Nev Power told Reuters on Thursday.
"Presumably they have higher priorities in the short term. Ultimately the need for it will be there and we think that interest from customers will bring it back," he said on the sidelines of an industry conference.
China's growing steel output has driven its demand for iron ore after weaker prices over the past three years curbed ore production at home. Imports of the steelmaking ingredient rose 9.3 percent to 669.65 million tonnes in the first eight months of 2016 from a year ago.
An official from Vale said discussions about blending ore were ongoing, but added that it was a "very complex deal".
"We are progressing, discussing. It's not something that is easy to implement," said Claudio Alves, global director of marketing and sales at Vale.
The plan to blend their ore could make material from both Fortescue and Vale more attractive for China's mills, improving and adapting quality at lower costs, Chinese steel players and traders have said.
Fortescue remains on track to meet its iron ore production cost target of $12-$13 per wet tonne for fiscal 2017, Power said. The miner in July cut it cost target for the period to that range from a fiscal 2016 average of $15.43 a tonne, taking it closer to bigger rivals.
Spot iron ore prices, which have risen this year after a three-year decline but whose upside has been largely capped at around $60 a tonne, are likely to remain stable at current levels along with China's annual crude steel output of around 800 million tonnes, he said.
"Most of the new supply projects have now been completed, therefore, provided demand stage is relatively stable we should see continuation of that price stability," Power said.
The iron ore price is holding steady, a whisker above the price estimate provided in the Federal Budget, as Macquarie analysts upgraded the outlook for mining giant BHP Billiton.
Iron ore settled at $US55.30 a tonne overnight, according to The Steel Index, unchanged from the previous session.
The commodity has been gradually easing back from a mid-August peak of $US61.80, with volatility sparked earlier this month by restrictions on industrial activity in China for the G20 summit.
If the key export sheds only another 0.7 per cent, it will be back below government forecasts. Iron ore has surprised many observers and offered some short-term relief to Canberra by managing to hold above the $US55 a tonne Budget estimate for much of this year.
Shares in BHP rose 1 per cent in London trade after Macquarie lifted its rating on the stock to outperform.
“Stronger demand and impact of supply side reforms in China have enhanced the outlook for most bulk commodities,” Macquarie said, according to Dow Jones.
But Macquarie singled out coking coal, thermal coal and manganese as the commodities for which it had “materially” upgraded its forecasts, while also lifting ratings for South32 and New Hope.
Analysts at a number of banks still expect iron ore to fall further as supply continues to outpace demand. The world’s biggest producers are set to increase output by nearly 50 million tonnes in the year to June 2017, Bloomberg report.
China is aiming to reduce extra capacity in its steel producers, and lower demand from steel mills is a negative for prices. Yesterday, news emerged that state-owned Baosteel Group will acquire Wuhan Iron and Steel Group as part of a push to consolidate the industry.
Chinese steel futures fell to a 7-week low on Monday amid few signs of a pick-up in demand in the world's top producer and consumer despite expected seasonal strength, while worries over a possible U.S. rate hike dampened commodities more broadly.
The most active rebar futures contract on the Shanghai Futures Exchange dropped more than 2 percent to 2,276 yuan a tonne by 0300 GMT, its lowest since July 26. It traded 1.9 percent lower at 2,281 yuan ($341.52) by the midday break.
Steel demand traditionally picks up in September after the summer slowdown, but actual demand has failed to show a recovery since August amid a cooling economy and the suspension of some construction activity for the G20 summit.
"Real demand in August was not as good as July and the G20 summit in Hangzhou hit consumption, so let's see if demand will grow in September," said Li Wenjing, an analyst with Industrial Futures in Shanghai.
On the Dalian Commodity Exchange, the benchmark iron ore futures contract fell 1.7 percent to 399 yuan a tonne by the midday break. It earlier hit a session low of 396.5 yuan a tonne, the lowest since July 27.
Iron ore port inventories CUS-STKTOT-IORE fell 2 percent to 103.75 million tonnes by last Friday, but remain at high levels, sticking above 100 million tonnes since July, industry website Umetal.com showed.
Chinese commodities fell across the board amid expectations that U.S. could consider a rate rise later this month. U.S. Federal Reserve official are divided on whether a rate rise is in the offing, with some of the permanent voting members appearing wary of supporting an immediate hike.
BHP Billiton Ltd., the world’s largest mining company, expects iron ore prices to begin retreating as “well-telegraphed” new supply hits the market from Australia and Brazil.
“Some of that supply is late, but we have every confidence it will arrive,” Huw McKay, BHP’s vice president of market analysis and economics, said Friday in an interview in Singapore. “We do expect it will weigh on price from where we are, and we’ll be closer to the middle of the range that we think about, rather at the top of the range, which is where the price is now. ”
The remarks by BHP add to a chorus of banks calling time on an unexpected rally after prices soared in 2016 to trade around $60 a metric ton over the last month after three years of declines. Citigroup Inc. and Morgan Stanley have flagged iron ore weakening toward the end of the year as more supply is shipped, with Westpac Banking Corp. predicting a slump below last year’s low of $38.30.
After a “unique” year, the under-performance of supply is expected to reverse over the next 12 to 18 months, McKay said at a media briefing earlier on Friday. “We still see new low-cost tons reaching the market later this year and definitely through calendar 2017.”
There are prospects for increased ore supply from Vale SA, which is expected to start output from its S11D project before the year-end, and from Australian billionaire Gina Rinehart’s Roy Hill, according to Morgan Stanley. The bank has estimated that prices may drop back to $40 as the approach of winter in China typically blunts steel demand and output.
“The market has been caught short in China because delivery towards supply targets had been so -- almost metronomic -- in recent years,” McKay said in the interview. “I don’t think there was much allowance for the fact that supply might undershoot.”
Ore with 62 percent content delivered to Qingdao has rallied 36 percent in 2016 to $59.24 on Monday, according to Metal Bulletin Ltd. This year, policy makers in China added stimulus, presiding over a revival in the property market and boosting the outlook for steel consumption and prices.
“For next year, whilst we see end-use quite stable, we see the composition in end-use a little different,” McKay said. “Machinery is actually very weak at the moment still, it’s infrastructure and housing and automobile that’s doing ok. We expect machinery to catch up a bit next year but housing will be slower.”
McKay is part of BHP’s marketing team in Singapore, which oversees the supply chain of the company’s products from asset to market and is responsible for defining its long-term view of market fundamentals. The team is led by the president of marketing and supply, Arnoud Balhuizen.
Apart from iron ore, the oil market is also set to rebalance over the next 12-to-18 months, with high volatility expected, Balhuizen said at the briefing when BHP launched its new blog series Prospects. Oil prices slumped to the lowest since 2003 in February, forcing BHP to cut operating rigs in the U.S. and trim its capital expenditure by about 44 percent for this fiscal year.
Iron ore futures in China dropped to two-week lows on Tuesday as appetite for the steelmaking raw material waned ahead of closures in the eastern city of Hangzhou for the G20 summit next week.
The lack of buying interest from top consumer China has pulled spot iron ore back below $60 a tonne. Renewed weakness in steel prices also pressured the raw material.
"The forced closure of steelmaking capacity ahead of next week's G20 summit in Hangzhou has seen enquiries shrink in recent days," ANZ Bank analysts said in a note.
Many small Chinese mills around Hangzhou have been ordered to suspend production to improve air quality ahead of the Sept. 4-5 meeting of world leaders.
A survey of 32 construction-steel mills in the region by industry consultancy Mysteel showed that almost half have either halted or curbed output since July, cutting steel output by nearly 1 million tonnes as part of the G20 and environmental curbs.
The most-traded iron ore on the Dalian Commodity Exchange closed 1.1 percent lower at 418 yuan ($63) a tonne, after matching Monday's trough of 414.50 yuan, the lowest since Aug. 15.
Further losses in Chinese futures could weaken spot iron ore further, having already slid nearly 5 percent from a 3-1/2-month high of $61.80 reached on Aug. 16.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI slipped 0.5 percent to $58.80 a tonne on Monday, a level last seen on July 29, according to The Steel Index (TSI).
"Traders lowered their offer prices to tempt sales, yet transactions remained thin," said TSI, which assesses iron ore deals in China.
On the Shanghai Futures Exchange, the most-active rebar fell 2.2 percent to close at 2,422 yuan a tonne. The construction steel product touched a three-week low of 2,418 yuan earlier in the session.
The iron ore price pushed higher overnight and is continuing to hover around three-month highs, defying two fresh calls for a looming slump.
Iron ore rose 0.8 per cent to $US61.60 overnight, according to The Steel Index, from $US61.10 in the previous session.
The commodity is now a whisker below the three-and-a-half-month peak of $US61.80 it reached last week, buoying large and small producers despite expectations the rally will not last.
The price’s strong showing boosted Australia’s mining giants in London trade and could flow through to the local market today. BHP Billiton shares jumped 4.4 per cent in London, while Rio Tinto rose 2.7 per cent.
Ratings agency Moody’s last night upgraded its credit ratings for pure play iron ore producer Fortescue Metals Group, following the miner’s aggressive debt repayments on the back of cost cutting and the surprise price rebound that helped it triple its full-year profit this week.
But Moody’s warned that iron ore prices are likely to stay volatile and could fall further, with its base case for the steelmaking ingredient set at around $US45 a tonne. Fortescue’s lower costs and debt should help it better manage this volatility, Moody’s said.
Elsewhere, analysts at Citi called the Fortescue profit a “great result”, but reaffirmed a sell call on the miner due to the bank’s bearish outlook for iron ore.
Citi affirmed its forecasts of an average iron ore price of $US42 a tonne in 2017 and $US38 a tonne in 2018, which are towards the more negative end of the spectrum of expectations.
Meanwhile, iron ore futures in Dalian rose to their highest level in two years, as Chinese steel mills restocked their supplies of the steelmaking commodity.
Pilbara-based iron ore miner Fortescue Metals Group has put tumbling commodity prices behind it to deliver a 212 per cent increase in full-year net profit to $US985 million ($1.3 billion).
The result was delivered despite a 17 per cent decline in sales revenue and was well above market expectations of a $US825 million underlying profit.
However, it was still behind the record $US2.4 billion result of 2014.
Fortescue chief executive Nev Power said in a statement to the ASX that "successful cost improvement measures and lower capital expenditure have more than offset the impact of falling iron ore prices to generate strong free cash flow".
"We have repaid $US2.9 billion of debt in the 2016 financial year, reducing net debt to $US5.2 billion and will continue to repay debt from operating cashflows."
The decline in sales revenue reflected a 29 per cent slide in the average price of iron ore to $US51.37 per tonne over the year.
Fortescue sold its ore on average at a 12 per cent discount to the benchmark price, but this is an improvement on previous years and, along with increased shipments, went some way to offsetting the revenue loss.
The key driver for the solid result was a 43 per cent reduction in operating costs over the year to $US15.43 per tonne.
The company highlighted further efficiency gains, reporting that operating costs had fallen to $13.10 per tonne by the end of the financial year.
Free cash flow from operations benefited from the efficiency gains, up 93 per cent to $US2.7 billion.
The final dividend was dramatically increased from 2 to 12 cents a share, pushing the 2016 financial year total payout to 15 cents per share.
The result has not met with an enthusiastic reception on the market, with Fortescue shares down 1.6 per cent to $4.85 on a day when BHP Billiton and Rio Tinto had declines around half that level.
China Investment Corp., the $814 billion sovereign fund, is leading a Chinese investor group in talks for a multibillion-dollar iron-ore streaming deal with Brazil’s Vale SA, people familiar with the matter said.
The consortium is negotiating the potential purchase of a portion of Vale’s future iron-ore output for as long as 30 years, two of the people said, asking not to be identified as the information is private. Vale could fetch about $9 billion upfront from the sale, one person said. No agreements have been reached, and the talks may not result in a transaction, according to the people.
Some Chinese companies and Japanese trading houses have also held discussions with the Rio de Janeiro-based company about possible deals, including acquiring a minority stake in Brazilian iron-ore assets owned by Vale, the people said.
A so-called streaming transaction would allow CIC, owned by the government of the world’s biggest iron-ore importer, to profit from a recovery in commodity prices without bearing all the operational risk associated with owning mines. Vale, which has said it will consider the sale of $10 billion of its best assets by the end of next year, would get immediate cash while staying in charge of valuable assets.
CIC didn’t answer calls to its Beijing-based press office seeking comment and didn’t immediately respond to faxed queries. A representative for Vale didn’t respond to calls and an e-mail seeking comment outside regular business hours in Brazil.
The World Bank expects commodity prices to recover modestly in 2017 as demand strengthens. It forecasts iron ore prices to fall next year, before rising to $65 a ton by 2025, according to a July report. Ore with 62 percent content delivered to Qingdao fell 0.3 percent to $60.71 a dry ton on Thursday, according to Metal Bulletin Ltd.
Vale has joined global miners Freeport-McMoRan Inc., Glencore Plc and Anglo American Plc in selling assets after its net debt swelled to about $27 billion as a commodity rout eroded earnings. Chief Executive Officer Murilo Ferreira raised the prospect of selling some of the company’s most prized assets in February, after the miner reported its first year of losses since 1997.
The world’s top iron-ore producer has exited coal mines in Australia and is in talks with U.S. fertilizer producer Mosaic Co. to sell its South American potash and phosphate assets, which may fetch about $3 billion, people familiar with the matter said this month.
On Thursday, Vale said a Brazilian court dismissed its appeal of a lawsuit in connection with a dam spill at its Samarco joint venture, which includes a lien prohibiting the miner from selling stakes in its iron-ore operations. A streaming deal would sidestep those limitations.
Samarco, which Vale owns jointly with BHP Billiton Ltd., is seeking a standstill agreement on about $1.6 billion in bank loans as its owners refuse to cover debt payments until mining resumes, people with knowledge of the matter said this month.
CIC is also part of a group alongside Brookfield Asset Management Inc. and Singapore sovereign wealth fund GIC Pte that is close to buying a stake in a Brazilian natural gas pipeline network from state oil company Petrobras for nearly $6 billion, people familiar with the matter said in June.
The iron ore price has edged back from yesterday’s three-and-a-half-month high but remains strong despite this week’s warning from BHP Billiton that more pain for the commodity could be ahead.
Iron ore fell 1.1 per cent to $US61.10 a tonne overnight, according to The Steel Index, from $US61.80 the previous day.
The move comes after mining major BHP effectively said the worst of the commodity rout was over, but warned this year’s strength in the iron ore price was temporary and unlikely to be sustained.
The surprising resilience of the commodity in recent months has been driven by the Chinese government’s economic stimulus plans and speculation on prices.
The price has been hovering well above analyst forecasts, which are clustered in the $US40s and low $US50s, offering some short-term relief to both major and junior miners that have raced to slash costs in recent years as a glut of the commodity and falling demand have weighed.
Some analysts welcome BHP’s moves to cut costs, as well as a cash flow performance that could have been worse.
“All key earnings and cash flow metrics came in ahead of our expectations on the back of stronger cost out performance,” Macquarie analysts wrote in a research note.
“The recent recovery in commodity prices now presents upside risk to our base case valuation.”
In London trade, BHP shares fell 0.3 per cent, while Rio Tinto lost 2 per cent.
The China Iron and Steel Association(CISA) said that the average daily crude steel output of large and medium-sized steel mills of China (all CISA members) totaled 1.5681 million tonnes in Jan 01-Jan 10 period, up 3.47 percent from last ten days( Dec 21-31, 2015).
China's large and medium-sized steelmakers made a combined loss of 3.15 billion yuan ($507.1 million) in the first two months of this year, an industry official said on Thursday, as a supply glut and slower demand growth dampened prices.
Apparent consumption of crude steel in China, the world's top producer and consumer of the construction material, fell 7.5 percent in January and February, Wang Liqun, vice chairman of the China Iron & Steel Association (CISA) told an industry conference.
Laden with debt and struggling to make money as the world's No.2 economy loses momentum, China's steel mills do not appear obvious candidates for overseas expansion.
But the country's crisis-hit steel sector is calling for strong government backing for plans to ramp up foreign acquisitions, as it looks to escape weak demand-growth and soaring environmental costs at home.
In a draft of a revised restructuring plan for the industry issued late last week, Beijing included a line saying it would support mills' efforts to buy assets abroad, with attention now turning to more detailed measures that could be announced later in the year.
"There is capacity that we can shift abroad, to regions that need it like Southeast Asia and Eastern Europe, as well as places like Indonesia and Africa where demand for steel is huge but production capacity is very low," said Deng Qilin, Chairman of Wuhan Iron and Steel Group, China's No.4 producer.
Foreign expansion by the world's biggest steel sector would offer some support to prices of steelmaking ingredient iron ore .IO62-CNI=SI, which plunged to record lows this month as Beijing ramps up environmental checks that could shut more mills in an industry where production capacity is 300 million tonnes above demand.
The export market offered one of the few bright spots for Chinese producers last year, but trade barriers erected amid accusations that China has been dumping products overseas mean exporting is becoming more difficult, with firms increasingly looking to shift actual output abroad.
Beijing has already rolled out measures to broadly encourage the foreign expansion of Chinese industry including simplifying currency rules and making it easier to raise money through bond markets, with sectors such as nuclear at the forefront of the drive overseas.
At this year's full session of parliament, Wuhan Iron and Steel along with another major producer, Anshan Iron and Steel Group, urged the government to provide financial and policy support for the steel sector's expansion abroad.
China's top steelmaking province of Hebei has also called for greater backing for its plan to move 20 million tonnes of capacity overseas by 2023.
Some are already making the leap, with Hebei Steel Group, China's largest steelmaker, looking to build a 5-million-tonne-per-year steel project under a joint venture in Africa.
Shougang, one of the largest mills, in February started production at a Malaysian project with an annual capacity of 3 million tonnes.
A smaller company, Bazhou New Asia Metal Products Co. Ltd, bought a stake in an Indonesian firm in 2013 to build a steel strip project, with vice-president Xing Xiuying saying it made the move as there was little room to expand in China.
"Investing abroad will help China to cut the excess capacity at home in the long run, as some companies will shift their focus to overseas markets and thus reduce output and competition domestically."
Others have found moving more tricky, with the Baosteel Group and Wuhan Iron and Steel both dropping plans to build plants in Brazil, blaming high costs.
"It will depend on how much capital is eventually engaged in helping Chinese firms go abroad, but generally speaking, the overseas expansion strategy will have a positive impact on Chinese steelmakers in seeking new growth," said Lawrence Lu, analyst at Standard & Poor's Ratings Services in Hong Kong.
Some were more sceptical, questioning whether there would be cost advantages to shifting output.
"The government should not use this as a main solution to ease domestic overcapacity as any blind push would bring consequences," said Jiang Feitao, policy researcher at the China Academy of Social Sciences.
Average daily output from China's large steel producers declined 5 percent to 1.682 million tonnes in the first ten days of March from the preceding 8-day period, data from the China Iron & Steel Association (CISA) showed on Wednesday.
Harsher environmental inspections and deepening losses have forced Chinese steel mills to cut output amid lukewarm steel demand in the world's top consumer. Rebar on the Shanghai.
China's crude steel output fell 1.5 percent to 130.5 million tonnes for the first two months of 2015, government data showed on Wednesday, as a supply glut and slower demand growth led mills to bring forward scheduled maintenance to curb output.
Average daily steel output slipped to 2.212 million tonnes, according to Reuters' calculations based on data from the National Bureau of Statistics, although the figure was up 0.7 percent from December.
China's statistics bureau releases combined output data for the first two months of the year in order to avoid monthly data being skewed by the Chinese new year holiday.
"A slower economy has hit production in power-intensive sectors such as steel. And a weak property market has also piled pressure on steel demand," said Cao Yang, an analyst with Shanghai Pudong Development Bank in Shanghai.
Steel prices lost 28 percent during 2014, due to overcapacity and the economic slowdown, and industry sources expect more inefficient steel mills to shut down this year, given tougher environmental laws.
Production by large Chinese steel mills dipped for much of January and early February but jumped 8 percent in the final 10 days of February to 1.77 million tonnes a day.
China, the world's largest steel producer and consumer, set its annual economic growth at about 7 percent this year, the lowest rate in a quarter of a century. The "new normal" is expected to weigh down demand for commodities.
Steel production grew 0.9 percent to 822.7 million tonnes in 2014, it slowest rate in more than three decades, as its cooling economy curbed demand and the government moved to tackle overcapacity and pollution.
Li Xinchuang, the vice secretary general of the China Iron & Steel Association, forecast in December that Chinese steel production would rise to 834 million tonnes in 2015.
Steel exports from top producer China fell sharply in February, indicating that Beijing's attempt to curb surging overseas sales by cancelling tax rebates on boron-added steel may have started to bear fruit.
Preliminary Chinese customs data showed that steel product exports in February were down 24.2 percent from January at 7.8 million tonnes, though they were still up 62.5 percent from a year ago.
"Given the China New Year distortions (in February) let's wait until the March data before getting too excited, but that's a big drop nonetheless," Nomura analysts said in a note.
Last year China's steel exports rose 50.5 percent to a record 94 million tonnes, with about 40 percent of the overseas shipments containing the chemical element boron to qualify for the tax rebate.
As such, the fall in exports last month provides some hope for an oversupplied industry struggling to absorb the flood of Chinese exports and battling with steel prices ST-CRU-IDX at their lowest since 2009.
However, the China Iron and Steel Association has forecast that steel exports will remain between 80 million and 90 million tonnes this year and there are some concerns that Chinese steelmakers could exploit other tax loopholes.
The European Union will impose anti-dumping duties later this month on imports of stainless steel cold-rolled sheet from China and Taiwan, according to two sources familiar with a European Commission proposal.
The Commission plans to set tariffs of about 25 percent for imports from China and of about 12 percent for Taiwanese product, following a complaint lodged in May 2014 by the European steel producers association, Eurofer.
The Commission will present its proposal to EU member states next week and by March 26 will put in place the duties, which are provisional pending the outcome of an investigation due to end in September.
Eurofer says that China and Taiwan shipped 620 million euros ($680 million) worth of cold-rolled stainless steel into the European Union in 2013, some 17 percent of the overall market, and were guilty of dumping, or selling at unfairly low prices.
A parallel investigation into alleged illegal subsidies for Chinese producers is also due to end in September.
Europe's largest stainless steel producers are Acerinox, Outokumpu and Aperam. Chinese and Taiwanese producers include Shanxi Taigang Stainless Steel Co, Baosteel <600019.SS > and Yusco.
The Commission, prompted by Eurofer, is also investigating alleged dumping of grain-oriented flat-rolled electrical steel, typically used in transformers, by producers in China, South Korea, Japan, Russia and the United States.
Eurofer is also seeking to prolong existing duties on Chinese imports of wire rod.
Eurofer told a news conference on Thursday that, despite a lower euro and a slow pick-up of European demand, European producers were still confronted with a massive increase of imports from Asia, and from China in particular.
Total Chinese steel exports rose to a historic peak of 93 million tonnes in 2014, Eurofer said, equivalent to 60 percent of total EU steel consumption.
Chinese steel exports to the EU increased to 4.5 million tonnes last year from 1.2 million tonnes in 2009.
Eurofer believes the large expansion of China's steel industry does not reflect cost advantages but is based on state-owned enterprises raising capital on preferential terms, as well as other forms of subsidy.
It also says China's exports include not just basic products, such as hot-rolled steel, but also high-end coated sheets.
Eurofer said it was also concerned by a potential export surge from Russian producers due to the lower rouble and depressed local economy. It has urged the Commission to monitor imports closely.
Crude steel capacity in China, the world's top producing country, is likely to grow this year despite difficult market conditions as new projects are coming onstream, the Ministry of Industry and Information Technology (MIIT) said on Thursday.
Long-standing overcapacity, slower growth in demand and tighter credit have forced many Chinese steel mills to produce at a loss or at low profitability.
"Generally, oversupply in the steel sector is unlikely to improve this year, exports will drop slightly, steel prices will stay at low levels and steel mills' profitability may not be positive," MIIT said in a report on its website (www.miit.gov.cn).
Investment in the ferrous metals smelting and processing industry fell 5.9 percent last year but remained at a relatively high level and there are still 2,037 new steel projects under construction.
China's crude steel capacity reached 1.16 billion tonnes at the end of 2014, with its production accounting for 49.4 percent of global output, MIIT said.
Some analysts expect capacity to increase by only about 10 million tonnes this year.
Despite the removal of an export rebate for boron-added steel products from this year, steel exports are expected to stay at elevated levels due to a continued supply glut at home and competitive prices, the ministry said.
The China Iron & Steel Association has forecast domestic crude steel output would fall 1.1 percent to 814 million tonnes this year, after rapid expansion over the past decade, as a slowing economy has hit demand for commodities.
China's apparent steel consumption fell 4 percent to 740 million tonnes last year, and steel demand is unlikely to improve much as Beijing is shifting its economic growth model and slowing fixed asset investment.
In order to minimise their risks on loans, banks have largely cut credit to Chinese steel mills since last year, leading to shutdowns and bankrupticies at some companies.
The debt-to-asset ratio for large steel mills dropped 0.8 percentage points to 68.3 percent last year but was still 11 percentage points higher than in 2007 when the industry experienced a boom.
Production from China's large steel mills fell 5.1 percent over Jan. 11-20 to 1.694 million tonnes, data from the China Iron and Steel Association (CISA) showed, with producers responding to weak demand by cutting output.
Steel demand is traditionally weak in January, but output rose to its highest rate since October in the first 10 days of the month, adding to a supply glut that has sapped prices.
China has eliminated 31.1 million tonnes of steel production capacity last year, higher than expected, a senior official of the industrial ministry said on Tuesday, as Beijing seeks to ease overcapacity and improve air quality.
China has also removed 81 million tonnes of cement production capacity, Mao Weiming, vice minister of the Ministry of Industrial and Information Technology, told at a presser in Beijing.
China, the world's largest steel producer, earlier set the target of 27 million tonnes for the steel sector.
Separately, Hebei province, the country's biggest steel-making region, has closed as much as 15 million tonnes of steel production capacity last year, meeting its target, but aims to shut only 5 million tonnes this year.
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Global resources giant BHP Billiton reported that copper output for the three months ended September 30 reached 273,900t, up 24% from the same period in the previous year, due to higher ore grades this quarter at its Escondida operation in Chile and the effects of a strike that impacted production in the year-ago quarter.
Output from Latin American operations grew by 32% to 235,700t, the company said in a statement.
The company's 57.5% share of output from Escondida amounted to 101,200t of copper in concentrate and 41,600t of cathode, representing increases of 103% and 26.4%, respectively. On a 100% basis, Escondida mined 103Mt of ore during the quarter, a 48.5% increase, with a 39.2% higher average head grade of 1.35% copper.
Escondida should see a 20% increase in copper output during fiscal 2013 after scheduled maintenance and tie-in activities were completed this quarter, according to the company.
Antamina in Peru contributed a record 40,200t of copper in concentrate in the 2012 quarter versus 30,300t in the year-ago quarter as milling rates continue exceeding nominal capacity, the company said. On a 100% basis, the mine registered throughput of 54.5Mt during the quarter, up from 44.2Mt, and an average copper head grade of 1.15% versus 1.11% year-on-year.
Antamina also contributed 14,514t zinc, up 62%, 919,000oz silver (-5.45%), 260t lead (155%) and 454t molybdenum (-23.7%). BHP Billiton holds a 33.8% stake in the mine.
The Spence and Cerro Colorado mines in Chile together produced 17,800t of copper cathode in fiscal Q1, a year-on-year decrease from 22,500t. The company also produces copper at the Olympic Dam mine in Australia and Pinto Valley in the US.
After four straight months of declines, consumer price inflation has finally edged up in China.
Chinese consumers paid 2% more in August than they did a year ago, the government's National Bureau of Statistics reported Sunday. That's up from a 1.8% increase in July -- a two-and-a-half year low.
China's annual inflation rate rose 2.0% in August, the government's National Bureau of Statistics reported Sunday, up from 1.8% in July -- a two-and-a-half year low.
Food prices, which account for more than a third of the inflation calculation, rose 3.4% during the month.
Household finances in China are especially susceptible to fluctuations in food prices, as many poor families spend large percentages of their income on food.
Still, inflation remains at very low levels. As recently as one year ago, China's consumer price index stood above 6% -- well north of the government's stated inflation rate target of 4%.
The very low rate should allow the government more flexibility in pursuing economic stimulus.
In July, officials said that annual economic growth dropped to 7.6% in the second quarter -- down from 8.1% the previous quarter.
The People's Bank of China twice lowered interest rates, and the central bank has also tried to spur growth by cutting the amount of money banks are required to hold in reserves.
But those measure seem to have fallen flat. Some analysts have recently lowered their growth forecasts for the rest of the year, while some noted that weakness is likely to extend into 2013.
On Friday, the government confirmed more action, this time in the form of a $157.7 billion investment in 55 new infrastructure products. Analysts said the move should help boost growth in the fourth quarter.
Zhiwei Zhang, and economist at Nomura, said in a research note that the projects -- which include 25 new subway lines -- are a sign that the government's policy stance "has become significantly more proactive."
China's official factory purchasing managers' index fell to a lower-than-expected 49.2 in August from 50.1 in July, official data showed on Saturday, in a result that is likely to strengthen the case for further policy steps to bolster growth.
The official PMI dipped below 50, which demarcates expansion from contraction, for the first time since November 2011, in the latest sign that the world's second-biggest economy is struggling against global headwinds.
Economists polled by Reuters this week had expected the August official PMI to slip to 50.
China cut interest rates in June and July and has been injecting cash into money markets to ease credit conditions to support the economy that notched a sixth straight quarter of slower growth in the April-June period.
But analysts are divided over whether that will be enough to stop the slowdown extending to a seventh quarter.
The PMI's output sub-index eased to 50.9 in August from July's 51.8, the National Bureau of Statistics said.
A flash PMI published last week by HSBC plunged to a nine-month low of 47.8 in August, as new export orders slumped and inventories rose, a signal that a persistent slowdown in economic growth has extended deeper into the third quarter.
According to the latest Reuters poll, China's annual economic growth could pick up to 7.9 percent in the third quarter from a three-year low of 7.6 percent in the second quarter in response to government policy fine-tuning.
A raft of weaker-than-expected July data had cooled market expectations for any quick economic recovery, especially as the central bank sticks to its "prudent" policy stance for fear of reigniting property and inflation risks.
Still, analysts believe the central bank will continue to loosen policy further by cutting interest rates and banks' reserve requirement ratio in coming months to support growth.
The HSBC PMI has been below 50 for 10 straight months, reinforcing calls from analysts and investors for further measures from Beijing to support economic growth.
The official PMI generally paints a rosier picture of the factory sector than the HSBC PMI as the official survey focuses on big, state-owned firms, while the HSBC PMI targets smaller, private firms that have limited access to bank loans.
There are also differing approaches to seasonal adjustment in the surveys.
The final HSBC reading will be published on September 3, as will the National Bureau of Statistics' services PMI.
Marc Faber, the Swiss investor and ultra bear, says there have been four mega bubbles in the past 40 years. In the 1970s it was gold; in the 1980s it was the Nikkei, and in the 1990s it was the Nasdaq. Bigger than all of them, though, has been the iron ore bubble, a tenfold increase in prices in less than a decade.
Iron ore is the raw material for steel, production of which has rocketed as a result of China's economic boom. Consider the following facts. In the past 15 years, China has built 90 million new homes – enough to house the populations of the UK, France and Germany combined. A quarter of global steel demand is for Chinese property and Chinese infrastructure.
Commodity-rich countries, like Australia, have never had it so good. China takes 25% of Australia's exports and iron ore accounts for 60% of all the goods Australia sells to China. One reason Australia avoided recession during the global downturn of 2008-09 was that it had a well-run banking system. A much bigger reason was that the country had become a giant pit from which China could extract the minerals it needed for its industrial expansion. Money flooded into the country from sovereign wealth funds and hedge funds looking for AAA investments. The Australian dollar has soared, as have property prices.
China's economy is now slowing, and although the economic data is not particularly reliable, it seems to be slowing fast. The country has two million unsold homes, with another 30 million under construction. There is a glut of iron ore and the price is falling. Where does that leave Australia?
Horribly exposed, quite obviously. It has an over-valued currency, an over-valued property market, and its major customer is now desperately pulling every available policy lever in the hope of avoiding a hard landing. Whatever happens, the Australian dollar is a sell. Just how big a sell will depend on how successful Beijing is in reflating the Chinese economy.
China's consumer inflation eased to its lowest rate in two and a half years in July, giving the government more leeway to loosen credit to spur the slowing economy.
The Consumer Price Index (CPI), a key gauge of inflation, grew to 1.8 percent year on year in July, the slowest rate since February 2010, the National Bureau of Statistics (NBS) announced Thursday.
The rate was 0.4 percentage points lower than the figure for June.
The Producer Price Index (PPI), a main gauge of inflation at the wholesale level, fell 2.9 percent in July from a year earlier.
The easing inflation is believed to be a result of the base effect. The CPI growth rate hit a 37-month high of 6.5 percent in July last year before gradually retreating as China's economy slowed for eight quarters in a row.
China's official factory purchasing managers' index (PMI) fell to an eight-month low of 50.1 in July, suggesting the sector is barely growing, while a rival HSBC survey indicated the more market-sensitive private sector is starting to recover.
The HSBC PMI rose to a seasonally adjusted 49.3, its highest level since February and little changed from a flash, or preliminary, estimate of 49.5.
With both PMI readings around 50 -- a threshold dividing expansion from contraction -- the surveys signal that the private and state-backed parts of China's vast factory sector are stabilising - albeit at a relatively low level of growth.
"It is clear that the manufacturing sector is doing very poorly, and requires policy support," Dariusz Kowalczyk, senior economist at Credit Agricole-CIB in Hong Kong said.
"However, we want to highlight the fact that such levels of sentiment are still consistent with positive growth of industrial output," he wrote in a note to clients.
Indeed, both the official PMI and the HSBC version showed factory output at 50 or above. Government data showed industrial output in June rose 9.5 per cent from a year earlier.
Copper prices retreated on Monday amid growing concerns of a spreading debt contagion in the euro zone as Spain risks becoming the fourth country in the bloc to seek a sovereign bailout, denting the outlook for metals demand worldwide.
Worries about the health of the global economy pushed Shanghai copper futures down more than 2.5 percent, bringing prices to their lowest since June 29. The most active November copper contract dropped as low as 54,540 yuan ($8,600) per tonne, its biggest percentage fall since June 4, before recovering some ground by the midday trading break.
Three-month copper on the London Metal Exchange had fallen 0.6 percent to $7,503.50 per tonne by 0418 GMT, extending losses after a decline of 2.4 percent in the previous session, the most since June 21.
"Shanghai copper is mostly playing catch up with London copper, which fell steeply on Friday due to concerns about the Spanish economy," said a Shanghai-based trader. "Chinese investors are also more sensitive to bad news lately, given that China's economy is evidently slowing down while physical copper demand has been sluggish as well."
Looking forward, market players said they expected major governments to introduce more stimulus to stabilise the world economy, which has been dented by slowing growth in China, a shaky recovery in United States and mounting debt problems in the euro zone. Such policies are expected to boost metal prices, at least temporarily.
Investors grew jittery about Spain's finances after the tiny region of Murcia said it would seek financial assistance from the central government, and media reported that half a dozen local governments were ready to follow in the footsteps of Valencia, which has already requested help from the central government to stay afloat.
Elsewhere in the euro zone, Greek Prime Minister Antonis Samaras said the country was in a "Great Depression" similar to the American one in the 1930s, two days before international lenders arrive in Athens to push for additional cuts needed for the debt-laden country to qualify for further rescue payments to keep it afloat.
Traders are awaiting manufacturing data from China and Europe, due on Tuesday, for further clues on the health of the global economy and its implications for metals demand.
"The next trading cues we are looking forward to are news of new stimulus measures in China and the United States, and concrete measures to deal with Spain's problems," said an analyst with a international trading firm. "The next stimulus measure to watch is an expected Bank reserve ratio cut by China.
But we don't think this will be rolled out in July since it would be too soon after the last interest rate cut."
The grim economic backdrop offset an International Copper Study Group report on Friday that said the global refined copper market was in a 384,000-tonne deficit from January to April 2012, up sharply from a 26,000-tonne deficit during the same period of 2011.
The report implied some support from fundamentals for copper prices at current levels, but bearish market sentiment and global economic uncertainties are weighing on the demand outlook and discouraging investors from buying.
China's Baotou Steel Rare-Earth Hi-Tech will join six other firms to invest a total of 70 million yuan ($10.98 million) to start a rare earths trading platform in early August, the firm said in a statement late on Friday.
Each shareholder will invest 10 million yuan and hold around 14.29 percent stake in the company, said Baotou Rare Earth, China's top rare earths producer.
Baotou said the exchange will help to establish a unified physical trading platform, allowing more transparency in prices.
China is the world's top rare earth producer and accounts for more than 95 percent of the global output. The exchange will help the country exert more control over the pricing of 17 strategically important rare earth metals on the global market.
Currently, prices in China are published by several independent consultancies and most of the metals have fallen over the past few months due to weaker demand.
The exchange will be located in Baotou city in China's Inner Mongolia region, home to nearly half of the world's light rare-earths production, Baotou said.
China’s growth fell to 7.6 per cent in the second quarter, its slowest since early 2009, as a property market downturn and weak exports weighed on the world’s second-biggest economy.
Over the past two months, as evidence of the slowdown has mounted, the government has shifted its policy to a pro-growth stance, which analysts say is likely to bring about a recovery in the second half of the year.
“The expectation for weakness in the second quarter was pretty strong. But the investment number is the surprise. There appears to have been a significant pick-up. That is policy beginning to work”, said Ken Peng, an economist with BNP Paribas in Beijing. “We are looking for a small rebound in the third quarter and a bigger rebound in the fourth quarter.”
The year-to-date investment figure jumped to 20.4 per cent last month from 20.1 per cent in May, an indication that the increase in investment in June alone must have been considerably stronger, following on the heels of the government’s moves to stimulate the economy.
The Chinese central bank cut interest rates last week, the second time in less than a month. Premier Wen Jiabao has also said that the government will look to increase public investment in order to stabilise the economy.
A steep drop in inflation, to just over 2 per cent from last year’s high near 7 per cent, has cleared the way for more aggressive policy easing.
The latest bank lending figures, published on Thursday, confirmed that the government is clearly trying to support growth. New loans reached Rmb920bn in June, up from Rmb793bn in May and more than expected.
Yet officials have also repeatedly vowed that they will not unleash a massive stimulus programme as they did in late 2008 when the global financial crisis erupted. That boom in spending and bank lending fuelled debt worries that China is still trying to contain as well as a property bubble that it has been trying to deflate.
Mr Wen has also been adamant that the government will not relax the measures that it has used to dampen property speculation, fearful that a big rebound in already lofty housing prices could ensue.
If the second quarter does indeed prove to be the trough of this economic cycle for China, commentators who have described the current downturn as a soft landing would have some vindication.
The peak-to-trough drop in growth would be 4.5 percentage points from 2010 to now. That contrasts with a plunge of 8 percentage points in the previous downturn, from 2007 to the start of 2009.
Consumer price inflation in China accelerated at the slowest rate since January 2010 in June, as food costs eased, official data showed on Monday.
In a report, China’s National Bureau of Statistics said consumer price inflation rose by a seasonally adjusted 2.2% in June, slowing from 3.0% in May.
Analysts had expected Chinese CPI to rise by 2.3% in June.
Month-on-month, the consumer price index fell 0.6% in June, compared to a 0.3% drop in May.
Politically sensitive food costs decelerated to 3.8% from May's 6.4%.
The report also showed that producer price inflation fell by 2.1% in June, compared to expectations for a 1.9% decline. Producer price inflation declined 1.4% in May.