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Chinese steel futures rose on Monday, supported by upbeat data and traders replenishing low stockpiles on expectations of firm demand next year, pulling up prices of raw material iron ore.
Growth in China's services sector accelerated to a 16-month high in November, a private survey showed. The survey, along with solid factory activity readings last week, suggest building momentum for China's economy at the end of a year that saw growth stabilise.
The most-traded May rebar on the Shanghai Futures Exchange was up 1.9 percent at 3,190 yuan a tonne by 0316 GMT. On the Dalian Commodity Exchange, May iron ore rose 3.5 percent to 601 yuan per tonne.
"We have not seen any signs of slowdown in steel production," said a Shanghai-based iron ore trader.
"Traders' inventory of steel products is very low so when the steel price goes up, they buy cargo to build their inventory and avoid further price increase," he said.
Stockpiles of rebar, a construction steel product, among Chinese traders rose for a second straight week to 3.68 million tonnes on Dec. 2, according to data tracked by SteelHome consultancy. SH-TOT-RBARINV
The inventory hit a four-month low of 3.51 million tonnes on the week to Nov. 18.
Winter is typically a slow period for China's steel market but traders are preparing for stronger demand after the Lunar New Year break in January, the Shanghai trader said.
Sustained appetite for high-grade iron ore also continues to support prices of the raw material as Chinese mills boost efficiency to use less of costlier coking coal, traders said.
But the wild swings in the futures markets probably remained driven by speculative investors, traders and analysts say, making it tougher for participants in the physical market to strike deals.
Last week, the spot iron ore price .IO62-CNO=MB surged nearly 9 percent on Thursday after sliding about 7 percent on Wednesday. It ended the week down 2.3 percent at $77.79 a tonne, according to data from Metal Bulletin.
Australian miner Rio Tinto is asking Chinese steel mills to pay a premium for its highest grade iron ore product for the first time since an annual pricing system collapsed in 2010, two sources familiar with the situation said.
The demand by the world's No. 2 iron ore miner comes as Chinese steel producers recover from years of losses, buoying demand for the steelmaking raw material, but could revive tensions between miners and mills over pricing that they seemed to have ditched six years ago.
Rio is seeking up to $1 per ton more than the index price for its Pilbara iron ore product, or PB fines, from Chinese mills on long-term contracts for 2017, the sources said, in a break from a years-long trend of pricing at spot values. Previously, Rio was selling the ore at a premium only to traders.
The miner has also pushed up the premium it seeks from traders to between $2 and $2.50 per ton over the index price for the same product for January to April, they said.
That would be a record high and up from a premium of $1.50 for the four-month period through December this year, said one of the sources who works closely with Rio in China.
From Chinese mills, Rio initially sought a 15-cent premium, but this week increased it to about $1, said the same source.
"The steel market is so hot this year and they think it's something that buyers can accept," the source said. "If Rio gets it, other miners may follow."
Rio Tinto declined to comment.
A reduction in China's steel capacity along with a push to spend more on infrastructure has fueled an 81 percent spike in Chinese steel prices this year, sparking a similar rally in iron ore prices.
Iron ore futures in China rose for a third straight day on Thursday, and at one point hit the highest level in almost three years, supported by firmer steel prices in the world's top consumer.
Both iron ore and steel came off the day's peaks, but the recovery in futures from last week's slide had lifted the price of spot iron ore by nearly 8 percent in two days as physical buyers chased higher prices.
The most-traded January iron ore on the Dalian Commodity Exchange closed up 2.4 percent at 622 yuan ($90) a tonne, after rising as much as 8.4 percent to 658.50 yuan, its loftiest since February 2014.
The contract rose by its 6-percent and 9-percent trade limits on Tuesday and Wednesday, respectively. The exchange set the limit for Thursday at 11 percent.
China's steel capacity closures have helped tighten supply, spurring steel prices higher and dragging raw material prices with them, said ANZ commodity strategist Daniel Hynes.
Fresh anti-pollution measures in Tangshan, which accounts for around 12 percent of China's total steel output, could push steel prices higher, he said.
Tangshan in China's northern Hebei province has ordered many of its industrial factories, including steel mills, to curb production or even close for as long as four months through to March in a bid to clear the skies of smog.
The price of construction steel product rebar on the Shanghai Futures Exchange ended 1.3 percent higher at 2,951 yuan a tonne, also rising for a third session, but was below the day's peak of 3,012 yuan.
The risk of supply disruptions from top iron ore exporter Australia could keep the price of the steelmaking raw material elevated in the short term, said Hynes.
"Forecasts for an above-average number of cyclones in Western Australia could hit iron ore exports," he wrote in a report. Over the past 12 years, Australia's iron ore exports have dropped an average of 5.4 percent in January-March from the previous quarter, he said.
"With the spectre of increased disruptions and a subsequently tighter market, steel mills are likely to continue restocking in the short term," Hynes said.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB rose 1.3 percent to $75.87 a tonne on Wednesday, according to Metal Bulletin. That brought its two-day gain to 7.9 percent.
Rio Tinto would not hesitate to cut its iron ore production if that would help boost its free cash flow and the company is not chasing market share, CEO Jean-Sébastien Jacques said.
RIO Tinto is preparing to sack up to 500 workers ahead of the March State election, a move likely to exacerbate tensions between the State’s biggest miner and WA Nationals leader Brendon Grylls.
More than 130 management and support roles could go in the next two months, after new iron ore boss Chris Salisbury completed a restructure of his senior management team last week.
Up to another 350 jobs are likely to go in the new year as the effects of the restructure flow through the company’s Perth head office and Rio’s mine, port and rail operations across the Pilbara.
It is the third major staff cut at Rio in the past two years, and would take the total jobs lost to more than 2000. The company shed about 700 workers early this year and about 800 early last year. It now has about 11,500 workers across the State.
Rio, BHP Billiton and the Chamber of Minerals and Energy have launched a public campaign against Mr Grylls’ push for a $5 a tonne production rental fee on the two miners’ iron ore exports, claiming the levy would cost jobs and risk further investment in the State’s mining industry.
The latest round of redundancies risks undermining that strategy and fuelling Mr Grylls’ criticism that the Pilbara’s big two do not contribute enough.
The State’s unemployment rate hit 6.5 per cent this month, after almost 50,000 full-time jobs were lost from the local economy over the past year.
The job cuts come after a sustained rally in commodity prices, which has seen the iron ore price increase from a long-term low of $US38.40 a tonne late last year to an average of more than $US60/t since July.
The iron ore price hit $US79.80/t early this month and the commodity was selling for $US72.79/t on Friday. BHP, Rio and Fortescue Metals Group have all flagged that they expect iron ore prices to drift lower next year, perhaps back to about $US40/t.
A Rio spokesman would not comment on the latest job cuts but said the market remained “challenging”.
“We have 1000 initiatives under way across our business to reduce costs and improve productivity,” he said.
CME chief executive Reg Howard-Smith said the Rio cuts were more evidence that Mr Grylls’ plan was ill-conceived.
“This is further evidence that now is the wrong time to be introducing a big new mining tax in WA that would put even more pressure on WA jobs and investment,” Mr Howard-Smith said.
“Taxes and royalties on WA mining are already seven times more than our biggest competitor Brazil.
“Mr Grylls’ plan is to make that worse and put more WA jobs and more WA investment at risk.”
Iron ore has plunged, running out of steam after its surge to multi-year highs last week following Donald Trump's shock presidential election victory.
Australia's largest export slid 6.5 per cent overnight to $US72.68 a tonne, after a surge of nearly 24 per cent in November alone. Tuesday's retreat hit mining stocks, with the Bloomberg World Iron/Steel Index falling for the first time in nine sessions.
"These massive swings are mostly driven by speculators, not really by fundamentals," says Daniel Morgan, commodities analyst at UBS. "Day to day you can have liquidity-driven trade speculator type big moves, but they tend to wash out pretty quickly."
There are nearly 108 million tonnes of iron ore stock waiting at Chinese ports, which is close to a two-year high, though coal supply in the world's second largest economy still remains limited.
"We understand the moves in metallurgical coal and copper given inventory levels, but we believe iron ore is simply being pulled up with the whole commodity complex," said Jeremy Sussman, analyst at Clarksons Platou Securities, in a note to clients.
China's crude steel production will decline to about 750 million to 800 million tonnes a year by 2020, the Chinese Ministry of Industry and Information Technology said on Monday.
Consumption will slow to 650-700 million tonnes by then, compared with demand of 700 million tonnes in 2015.
Rather than focus on iron ores volatile movements, investors are largely awaiting property data out of China. A recent raft of new restrictions on property buyers in China has investors worried there might be a curb in construction, ultimately dampening appetite for Australian iron ore.
"People are looking for this not to roll over in any harsh way," says Mr Morgan. "Some of the home purchase restrictions that have been put in place are a risk that's out there for iron ore."
Iron ore has surged 90 per cent since touching a low of $US38.30 last December and producers have enjoyed the commodity's bold moves, with share prices across the mining boards leaping higher.
But iron ore bumping up against $US80 a tonne has investors sceptical the price will stay supported.
"It's definitely run too far, too fast," says Romano Sala Tenna, portfolio manager at Katana Asset Management. "The fundamentals don't back it up and if the price gets out of hand you'll see a lot of idle production come online pretty quickly."
In Western Australia, a record amount of shipments went out of Port Hedland in August, and so far this year, shipments have spiked 14 per cent higher than a year earlier.
The surprise election-win by the Republican candidate Mr Trump saw a rapid upwards sweep in broad commodity prices, however, investors insist iron ore is a Chinese story, not an American one.
"By the time some of these Trump policies are supposed to come through, it will be in the second half of next year," says Mr Sala Tenna. "So until then we won't see any tangible impact on steel demand itself."
Copper also suffered a sharp fall overnight. Copper is the best performer on the LME this quarter and jumped 11 per cent last week, the most in five years. The surge in interest from China and more signs of economic resilience in the country, which consumes more than 40 per cent of the world's supply, have helped prices that lagged most metals throughout the year.
While the recent metals rally prompted some analysts to raise price forecasts, they're still bearish in the medium term.
"The market has become too bullish, too quickly on some metals, namely copper, and we continue to see supply differentiation going forward," Goldman analysts, including Max Layton in London, told Bloomberg. "The outlook for copper is bearish from current levels."
Iron ore futures in Asia dropped sharply on Tuesday, after a frenzied rally over the past week to multi-year highs, as weaker Chinese steel prices tamed bullish bets on the raw material.
Some analysts say the rally in iron ore that saw the benchmark spot price soaring 23 percent last week - its biggest such gain ever - may have been driven more by speculative play.
At nearly 108 million tonnes, stocks of iron ore at Chinese ports remain close to two-year highs, while coal supply in the country was limited amid shuttered mines. Copper inventory on London Metal Exchange warehouses has dropped to their lowest since August.
"We understand the moves in metallurgical coal and copper given inventory levels, but we believe iron ore is simply being pulled up with the whole commodity complex," Clarksons Platou Securities analyst Jeremy Sussman said in a note.
The most-traded January iron ore on the Dalian Commodity Exchange was down 4.4 percent at the session's low of 601 yuan ($88) a ton by midday, after hitting a 33-month high of 656.50 yuan on Monday.
On the Singapore Exchange, January iron ore fell 3 percent to $72.44 a ton.
Activity in the physical iron ore market was limited, traders said, after recent deals that lifted the benchmark spot price to a more than two-year high at near $80 a ton.
Iron ore for delivery to China's Tianjin port was unchanged at $79.70 a ton on Monday, according to The Steel Index.
Chinese spot steel prices also retreated along with futures, traders said.
China's crude steel production will decline to around 750 million to 800 million tonnes a year by 2020, the country's Ministry of Industry and Information Technology said on Monday.
Consumption will slow to 650-700 million tonnes by then, compared with demand of 700 million tonnes in 2015, it said.
That suggests China's steel production will drop by 1 percent annually between 2017 and 2020, said Argonaut Securities analyst Helen Lau.
The most-active rebar on the Shanghai Futures Exchange dropped 5.3 percent to 2,879 yuan a ton, after touching 3,220 yuan on Monday, its strongest since May 2014.
Iron ore futures in China surged by their 9-percent limit on Thursday to hit a 30-month peak, extending a recent rally backed by strong coking coal markets as well as steel prices.
Higher fees imposed by the Dalian Commodity Exchange on trading of coking coal and coke futures have diverted some funds into iron ore, traders and analysts said, helping iron ore outperform the rest of the ferrous market.
Spot iron ore topped $70 a tonne on Wednesday for the first time since January 2015, reflecting firm demand for high-grade cargoes as Chinese mills boost efficiency amid costlier coal, and could track further gains in futures.
The most-traded January iron ore on the Dalian exchange was up 5.9 percent at 571.50 yuan ($84) a tonne by midday. It hit its upside limit of 588 yuan earlier, its loftiest since April 2014.
While there is "no big rush" among Chinese steel mills to buy iron ore cargoes, "supply of high grade is limited, so it's natural to see prices rise", said an iron ore trader in Shanghai.
"Clients are now only looking for high grade and are showing no interest for low grade," he said.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI surged 4.7 percent to $71 a tonne on Wednesday, according to The Steel Index. That was the biggest single-day gain in two weeks for the spot benchmark which has risen almost 66 percent this year.
There was renewed interest in iron ore futures after the Dalian exchange this week raised margins and fees for coking coal and coke following recent rapid gains.
"Recent curbs on coal futures trading were seen diverting funds back into (iron ore)", ANZ Bank said in a note.
Dalian coking coal was down 0.5 percent at 1,488 yuan a tonne after hitting a fresh record high of 1,608.50 yuan. Coke trimmed gains, up 0.7 percent at 2,072 yuan per tonne after peaking at 2,205 yuan, its strongest since February 2013.
Steel futures also came off session highs. Construction steel product rebar on the Shanghai Futures Exchange was last up 0.7 percent at 2,963 yuan a tonne, after rising by its 6-percent limit to 3,119 yuan, the highest since August 2014.
The spot iron ore price is defying the fundamentals of supply and demand, leaping a further 1.5 per cent overnight to a fresh seven-month high of $US68.30 a tonne.
The move follows a massive 4.4 per cent jump overnight Monday to $US67.43 a tonne.
The Metal Bulletin benchmark spot price has soared more than 28 per cent since September 1 despite Chinese trade data out yesterday showing a 15 per cent slump in iron ore imports to 80.8 million tonnes last month.
China’s imports were up 8.9 per cent over a year ago when prices were in freefall but the sharp drop last month raised the risk speculators were running prices ahead of demand.
Ore inventories rose 2.7 per cent to a two-year high of 108.6 million tonnes in the past week, just shy of the 113.7mt peak
“While higher prices in recent weeks increases the risk of a pick-up in domestic supply in China, in the short term we believe import demand will remain strong,” ANZ senior commodity strategist Daniel Hynes said.
Steel product exports fell 14.7 per cent year-on-year to 7.7mt, fuelling suggestions that export-driven demand had weakened.
Steel export weakness may have been from stronger domestic demand diverting steel away from international markets.
Iron ore futures in China rose to the highest in more than two years on Wednesday, supported by stronger steel and coal prices and a mending Chinese economy.
Activity in China's manufacturing sector expanded at the fastest pace in over two years in October thanks to a construction boom, according to data released on Tuesday.
Iron ore for January delivery on the Dalian Commodity Exchange climbed as far as 509 yuan ($75) a tonne, its loftiest since July 2014.
By 0223 GMT, the contract had eased 0.2 percent to 499.50 yuan, in line with a retreat in other Chinese traded commodities such as aluminium and rubber after recent gains.
Dalian iron ore gained 24 percent in October, driving a 16 percent increase in spot iron ore prices.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI rose 0.9 percent to $64.40 a tonne on Tuesday, the highest since April 29, according to The Steel Index.
Traders have mostly attributed iron ore's climb to the strength in coal prices as mills sought higher grade iron ore to be able to use less coal.
But Goldman Sachs said it may have more to do with the recent weakness in the yuan.
"A rising dollar/yuan led onshore investors to seek dollar-linked assets such as commodities and iron ore may be the first in line to benefit from such investment flows," Goldman analysts said in a report.
There may be further room for the yuan to depreciate given the high likelihood of the U.S. Federal Reserve hiking interest rates in December, they said.
"With ample onshore money supply chasing a limited menu of accessible dollar-linked assets, continued yuan depreciation means that iron ore prices may stay above what the fundamental demand and supply suggest in coming months," Goldman analysts said.
Steel and coal futures remained strong on Wednesday. The most-active rebar, a construction steel product, on the Shanghai Futures Exchange was up 1.2 percent at 2,637 yuan a tonne after touching 2,665 yuan earlier, the highest since April 25.
January Dalian coking coal rose 2.3 percent to 1,320.50 yuan a tonne, after touching a contract high of 1,348.50 yuan. Dalian coke was up 1.8 percent at 1,817 yuan, after earlier hitting 1,843 yuan, its strongest since March 2013.
Chinese iron ore futures rose for a third day running to their highest in more than two years on Wednesday as surging coal prices lifted demand for higher grade iron ore to boost efficiency and use less coal.
Coal shortages in China after government-led capacity cuts that shuttered many mines has spurred prices of the fuel, including coking coal and coke used in steelmaking.
"Coke is becoming very expensive and mills are now using more high-grade iron ore so they can be more efficient to reduce consumption of coke," said a Shanghai-based iron ore trader.
Iron ore for January delivery on the Dalian Commodity Exchange rose as much as 5.1 percent to 487.50 yuan ($72) a tonne, its strongest since August 2014. The contract was up 2.3 percent at 474.50 yuan by 0240 GMT.
January coke was up 5 percent at 1,718.50 yuan per tonne, after touching 1,765 yuan earlier, its highest since August 2013. Coking coal for the same month of delivery climbed as much as 4.5 percent to a contract high of 1,332 yuan.
"The iron ore market is becoming two-tiered. High grade ore is enjoying good demand while demand for mid- to low-grade is not that strong," the Shanghai trader said.
That has been forcing suppliers of low-grade iron ore from India and Iran to offer deep discounts to attract buyers.
Stronger futures have lifted bids for physical iron ore cargoes, traders said, pushing the spot benchmark above $60 a tonne for the first time since August.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI jumped 4.9 percent to $61.60 a tonne on Tuesday, a level last seen on Aug. 23, according to data from The Steel Index.
Annual gains in iron ore prices, however, were much smaller compared to coking coal's. The spot iron ore benchmark has risen 43.6 percent this year while spot Australian premium hard coking coal .PHCC-AUS=SI has surged 214 percent to $245.50 a tonne on Tuesday.
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.