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Chinese steel and iron ore futures sank to their lowest in more than six weeks on Monday, extending a five-day losing streak as speculative investors continued their exodus amid mounting concerns about demand and growing inventories.
Iron ore was on track for its biggest one-day drop since late November as stockpiles at major ports in China, the world's top steelmaker, rose for a second week, topping 132 million tonnes last week, the highest since at least 2004, according to SteelHome consultancy.
Steel was set for its worst day since early February as funds and other speculative investors exited long positions and placed fresh bearish bets.
At 0417 GMT, the most-active rebar contract on the Shanghai Futures Exchange was down 3.97 percent at 3,026 yuan ($440.31) a tonne, after falling as far as 3,003 yuan, its lowest since Feb. 10.
Iron ore on the Dalian Commodity Exchange plunged 5.95 percent to 545.5 yuan ($79.37) per tonne, having touched 541 yuan earlier, its weakest since Feb. 8.
"China's steel market is showing signs of price weakness and the move of (hot-rolled-coil) prices into a discount relative to domestic rebar prices is a sign of further weakness ahead," said Barclays Capital.
"We feel that there is further downside risk for the benchmark (iron ore) price."
The bank expects iron ore prices to average $70 per tonne in the second quarter, down from around $80 currently.
The latest sell-off threatens the months-long rally and was triggered by concerns about demand from the building sector after Beijing imposed fresh curbs on lending in real estate in China last week.
Last week, rebar lost 5.5 percent and iron ore fell 7 percent, the biggest weekly drop for both contracts since December.
It's taken a while but the iron ore market is finally getting the reality check it needed, although the Chinese part of the market still looks like it requires a bigger dose.
Spot iron ore fell to $84.99 a tonne on Wednesday, down 10.4 percent since its peak this year of $94.86, reached on Feb. 21, although it is still up 7.7 percent so far this year.
The most-actively traded iron ore futures contract on the Dalian Commodity Exchange (DCE) fell to 677.5 yuan ($98.37) a tonne on Wednesday, a drop of 6.9 percent since its peak so far this year of 727.5 yuan on Feb. 21.
However, the DCE contract is still up 22.2 percent so far this year, indicating that while it has started to correct, the process still has likely some way to go.
This can be seen by looking at the gap between the spot price for cargoes delivered to China and the DCE price, the latter of which is driven by small investors and day traders who often respond differently than the end-user buyers and sellers that participate in the spot market.
In U.S. dollar terms, the DCE contract was at $105.73 a tonne at its 2017 peak on Feb. 21, a premium of $10.87, or 11.5 percent, to the prevailing spot price.
The premium had actually widened by Wednesday to $13.50 a tonne, or 15.9 percent, showing that while DCE futures have lost some ground, they are lagging well behind the correction in the spot price.
In U.S. dollar terms the DCE contract traded at a discount to the spot price in 2014, 2015 and for most of 2016, flipping only to a premium around August last year, before narrowing to parity by December.
However, the DCE's premium to the spot price has blown out so far this year, giving credence to the view that there was speculative froth in the Chinese domestic market.
It's also worth noting that the current correction in prices is happening without any real change in the underlying narrative of the Chinese iron ore and steel markets.
The outlook for 2017 is still fairly healthy for infrastructure and property in China, although this has been tempered by concern over a possible trade slowdown because of the protectionist leanings of new U.S. President Donald Trump.
On the data front, it appears that China's iron ore imports will be high again in March, continuing their recent strength.
Vessel-tracking and port data compiled by Thomson Reuters Supply Chain and Commodity Forecasts show that an estimated 97.79 million tonnes of iron ore is due to, or has already, arrived at Chinese ports in March.
If the actual number is close to this estimate, it would be a record for monthly imports, and above the customs figures of 83.49 million tonnes in February and 92 million in January.
The vessel-tracking data typically comes in below the customs numbers, but even if the final numbers are below the current estimate, it's still likely that March will be an exceptionally strong month.
The point of concern in the prevailing market narrative is the level of port stockpiles in China, which rose to 131 million tonnes in the week to March 17, up from 113.9 million at the start of this year, and 65 percent above the low of 79.4 million recorded in mid-2015.
The level of inventories has been one factor regularly cited by market analysts as to why iron ore prices must inevitably decline, a process that finally appears to be underway.
While it's always difficult to predict how far prices will drop, it does seem the ongoing correction is likely to be steeper for the DCE futures than for the spot price, and the Singapore Exchange contracts, which are based on the spot assessments.
The SGX futures curve is indicating a price of $65.89 a tonne for the contract expiring in December this year, a level closer to what many analysts would deem fair value.
But a measured decline to those levels would be unusual, given the recent history of price spikes and slumps in iron ore.
Chinese steel and iron ore futures ticked lower on Monday but stayed near recent highs, supported by expectations that property sales in the world's top steel consumer would remain strong despite Beijing's efforts to tame the sector.
China's top economic planning agency said on Sunday the government would control rapid flows of bank credit to the property sector to help contain risks. The country's red-hot property market picked up pace in February after price gains slowed in the previous four months.
"The re-acceleration in new home prices last month raises concerns that Chinese policy is becoming increasingly ineffective at keeping a lid on property prices," Commonwealth Bank of Australia analyst Vivek Dhar said in a note.
The most-active rebar on the Shanghai Futures Exchange closed down 0.2 percent at 3,581 yuan ($519) a tonne. The construction steel product reached a three-year high of 3,692 yuan on Wednesday.
Iron ore on the Dalian Commodity Exchange was off 0.4 percent at 711.50 yuan per tonne, not far below a three-week peak of 735 yuan it hit on Thursday.
Both rebar and iron ore posted their biggest weekly gain in two months last week.
The price gains came after China last week said property sales surged in the first two months of the year despite government measures to cool the market.
The strong sales "ignited market confidence over steel demand from the property sector," Citi analysts said in a note.
Citi upgraded its projection of China's 2017 gross-floor-area new starts to a growth of 2 percent from a prior estimate of a decline of 8 percent "and we expect steel demand to follow a similar path", the analysts said.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB slipped 0.3 percent to $92.34 a tonne on Friday, according to Metal Bulletin. But the spot benchmark gained 6.5 percent last week, its biggest such gain since late November.
Chinese iron ore futures fell for a third straight day on Tuesday, pressured by a rising mountain of the raw material at China's ports and weaker steel prices.
The decline broadened iron ore futures' losses to nearly 11 percent since hitting a record high last month, and could pull down spot prices further after dropping below $90 a tonne on Monday for the first time since early February.
"Iron ore prices have increased this year as Chinese steel mill margins have rebounded," Commonwealth Bank of Australia analyst Vivek Dhar said in a note.
"However, it is unlikely that steel margins will remain elevated for too long as mills boost output. We see surplus conditions forming in iron ore markets as supply increases and restocking demand wanes," wrote Dhar who sees iron ore falling to $60 by the fourth quarter.
The most-traded iron ore on the Dalian Commodity Exchange dropped 2.2 percent to close at 661.50 yuan ($96) a tonne. The contract touched 741.50 yuan on Feb. 21, its loftiest since inception in October 2013.
The most-active rebar on the Shanghai Futures Exchange ended 0.5 percent lower at 3,494 yuan a tonne.
Stockpiles of imported iron ore at major Chinese ports reached 130.05 million tonnes as of March 3, SteelHome said, the most since 2004 when the consultancy began tracking the data.
Iron ore for delivery to China's Qingdao port fell 1.7 percent to $89.73 per tonne, the lowest since Feb. 10, according to Metal Bulletin.
The spot benchmark reached a 30-month peak of $94.86 on Feb. 21.
China's biggest steelmaking province, Hebei, will close its last "zombie" steel mills by the end of next year, the governor said on Tuesday, marking a small victory in the region's years-long battle to clean up its air and cut excess capacity.
This year, the province will shut four "zombie" mills, or plants that have stopped production but have not closed down, and another four in 2018.
Iron ore and steel futures in China jumped more than 4 percent on Monday, resuming their rally, amid planned curbs in steel production in key areas and a pickup in seasonal demand.
Rebar prices pushed to a fresh three-year high and iron ore neared a record peak, as both commodities benefited from China's efforts to tackle a steel glut and boost infrastructure spending.
The most-active rebar on the Shanghai Futures Exchange was up 4.7 percent at 3,610 yuan ($525) a tonne at 0320 GMT after rising as far as 3,648 yuan earlier, its strongest since February 2014. The construction steel product has gained about 24 percent this year.
Iron ore on the Dalian Commodity Exchange was up 4.4 percent at 722.50 yuan per tonne. The steelmaking raw material has risen 30 percent this year, having touched a record high of 741.50 yuan last week.
Steel producers in the Hebei-Beijing-Tianjin area have been asked to shift their peak-load production to reduce pollution ahead of the start of China's National People's Congress on Friday, said Helen Lau, analyst at Argonaut Securities.
Steel inventory held by Chinese traders fell to 16.29 million tonnes as of Feb. 24 from 16.39 million tonnes in the prior week, the first decline since last November, due to seasonal demand recovery, she said.
"Looking ahead over short and mid-term, China's steel market will remain tight on the back of production regulation and seasonal demand recovery. We expect to see more upside in steel prices in both spot and futures markets," Lau said in a note.
The revival in futures could push spot iron ore prices back toward $100 a tonne, after retreating last week as some traders cast doubt on the sustainability of this year's rally amid ample stocks of the raw material in China.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB slipped 0.9 percent to $90.50 a tonne on Friday, according to Metal Bulletin. The spot benchmark hit a 30-month peak of $94.86 last Tuesday.
China's iron ore futures slid nearly 5 percent on Friday and were headed for a weekly loss after a rapid rally underpinned by expectations that strong infrastructure spending would spur steel demand in the world's top consumer.
The fall pulled iron ore futures further away from a record high reached earlier in the week, and should similarly drag down spot prices, which have climbed to multi-year highs near $100 a tonne.
The most-traded iron ore on the Dalian Commodity Exchange was down 4.9 percent at 681 yuan ($99) a tonne, after initially touching a two-week low of 674 yuan. The contract, which hit a record high of 741.50 yuan on Tuesday, was down 2.6 percent for the week.
"The size of today's move does reflect the speed with which iron ore has risen. But I suspect we will find a base over the next session or two before moving higher again," said Michael McCarthy, chief market strategist at CMC Markets.
For some investors, it's "a shorting opportunity looking for a more normal iron ore price," he said.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB fell 3.1 percent to $91.34 a tonne on Thursday, according to Metal Bulletin. The spot benchmark, which hit a 30-month peak of $94.86 on Tuesday, was still up 1.1 percent so far this week.
"The underlying supply-demand (condition) is supportive of higher prices in my view. I wouldn't be surprised to see an iron ore price above $100 a tonne," said McCarthy.
Iron ore prices have tracked the rally in China's steel market that had been supported by hopes of a pickup in construction activity from next month as well as Beijing's efforts to boost infrastructure investment to spur the economy.
"While we continue to believe that steel and iron ore prices are factoring in overly optimistic demand projections, China is likely to keep infrastructure investment, particularly transport, supported to shore up growth before elections in November," Commonwealth Bank of Australia analyst Vivek Dhar said in a note.
The most-active rebar on the Shanghai Futures Exchange dropped 2.9 percent to 3,411 yuan per tonne, after hitting a three-year high of 3,630 yuan on Tuesday.
Perth-based mining company Fortescue Metals Group (FMG) has posted a big jump in profit for the six months to December on the back of a surge in iron ore prices.
FMG revealed its profit leapt to US$1.2 billion in the six months to the end of December.
That was significantly higher than the profit of US$319 million recorded the same period last year.
The increase followed a significant recovery in the iron ore price in 2016, with spot prices currently sitting at a 30-month high of around $US90 a tonne.
FMG also revealed the improved market conditions had allowed it to repay another $US1.7 billion in debt.
"Our team has continued their unwavering focus on delivery against safety, productivity and cost reduction targets," FMG chief executive officer Nev Power said.
"We achieved further improvement in our C1 costs to US$13.06 [per wet metric tonne] and shipped 86.1 million tonnes for the half year, slightly ahead of our targets."
Fortescue said it remained on target to ship 165-170 million tonnes of iron ore this year.
The company announced a 20 cent per share fully-franked interim dividend off the back of the six-month results.
Mining analyst Tim Treadgold said while many stockbrokers had been forecasting the demise of FMG for many years, the company's prospects were extremely positive.
"It's a combination of the higher iron ore price — which we can all see — and the lower costs, which the company has been able to achieve by reducing its workforce and operating with greater efficiency.
"It's very much out of the woods, it's home and hosed ... if they can hold their costs down to a very low US$13 dollars a tonne and they continue to retire debt.
"You could well see this company being debt free in the next year or so, which is a remarkable situation considering where they were."
Iron ore futures in China surged more than 5 percent to a record high on Tuesday, pushed by a sustained rally in steel prices as investors bet on strong demand and tighter supply as Beijing tackles excess production capacity.
Other steelmaking raw materials coking coal and coke extended gains amid possible curbs on coal output and China's suspension of North Korean coal imports.
"Revival of infrastructure investment has been driving demand for steel and hence iron ore," said Wang Fei, analyst at Hua'an Futures in Hefei in eastern China.
Traders and analysts expect construction and industrial activity to gain steam from March when spring begins.
The most-traded iron ore on the Dalian Commodity Exchange rose as far as 741.50 yuan ($108) a ton, its strongest since the bourse launched the contract in October 2013. It closed up 3.8 percent at 732 yuan.
Rebar on the Shanghai Futures Exchange ended 1.7 percent higher at 3,575 yuan per ton. The construction steel product touched 3,630 yuan earlier, its loftiest since February 2014.
"While we anticipate resilient steel demand in China this year on the back of infrastructure investment, we think current pricing is too optimistic," Commonwealth Bank of Australia analyst Vivek Dhar said in a note.
Iron ore has piggybacked on the strength in steel prices, and the rally comes despite a rising mountain of the raw material at Chinese ports.
Stockpiles of imported iron ore at major Chinese ports reached 127.55 million tonnes, the most since at least 2004, according to data tracked by SteelHome consultancy.
Amid strong futures, spot iron ore for delivery to China's Qingdao port climbed 2.2 percent to $92.34 a ton on Monday, the highest since August 2014, according to Metal Bulletin.
BHP Chief Executive Andrew Mackenzie said he sees a little downside risk for iron ore prices as Chinese demand moderates.
"Overall investors remain bullish on steel and coal on a flurry of government announcements to cut steel capacity and curb coal output," said Wang.
China has strengthened its campaign since last year to slim down its bloated steel and coal industries, which have also contributed to the excessive smog in its major cities.
Dalian coking coal rose 1.1 percent to 1,268 yuan a ton and coke advanced 1 percent to 1,736 yuan.
China's top coal producers will meet to discuss plans for stabilising output this year, as Beijing stopped all imports of coal from North Korea from Sunday.
Chinese engineers who carved a railway through the Qinghai-Tibet Plateau and built the world's longest sea-bridge across Hangzhou Bay have a new challenge: developing a $3.4 billion project on Australia's remote Eyre Peninsula to meet increased demand for cleaner iron ore.
China Railway Group Ltd, the world's second-largest infrastructure builder, is backing the mine, port and rail-road project that aims to supply high-quality, lower-emission ore to Chinese steel mills facing stricter environmental rules.
The project would be a major step toward South Australia's goal of securing A$10 billion ($7.7 billion) of investments to fund a stable of new iron ore mines by 2021. China Railway's partner Iron Road Ltd aims to bring the 24 million metric ton-a-year mine into production in late 2020 after tests showed its product can help customers meet the tougher standards.
Yi Zhu, an analyst at Bloomberg Intelligence in Hong Kong, said: "Chinese mainland demand for higher-quality iron ore will increase, driven by stricter environmental protection regulations and improved profitability of steel mills."
A restructuring of China's steel sector will also boost demand for premium quality imports, according to researcher CRU Group.
China plans to invest 2.5 trillion yuan ($365 billion) in renewable energy through 2020 to reduce greenhouse gases and is seeking to curb emissions by iron and steel producers. Mills are being compelled to upgrade their plants or cease operations if they fall short of standards, according to Bloomberg Intelligence.
Iron Road's iron ore will never solve all of the problems facing Chinese steel mills but "it will certainly help them," Managing Director Andrew Stocks said by phone from Adelaide.
He said: "We see an increase in productivity, a decrease in fuel use and a decrease in atmospheric emissions－it's not quite the Holy Grail, but there are three very positive attributes to improve the steel mills."
Stocks is planning to meet with banks in Beijing and Shanghai this month and expects a final investment decision to be made this year. Under an interim 12-month accord signed last year, China Railway anticipates taking as much as a 15 percent stake in the project, if approved, and will be the prime construction contractor, Iron Road said in a filing.
China Railway views the Eyre Peninsula as the preferred development location for a large-scale, long-life, high-grade iron concentrate development as opposed to competing locations in Western Australia, Eastern Canada and West Africa, according to an Iron Road filing. Calls to China Railway's Beijing office weren't answered and emails to an address on the company's website received no reply.
In 2016, China shed more than 65 million tons of excess steel capacity and 290 million tons of inefficient coal mining capacity, Premier Li Keqiang said last month.
South Australia's government believes it has the right ore to meet the new demand－about 14 billion tons of untapped magnetite, a higher-quality ore that contains more of the metal and fewer impurities than dominant market rival hematite. While it costs more to process magnetite, the product commands a premium from mills producing high-quality steel.
The state's ambition to export 50 million tons of magnetite by 2030 is dwarfed by the predominantly hematite ore production in neighboring Western Australia, which accounts for more than half of global exports and is forecast to ship more than 860 million tons this year. Magnetite currently accounts for only between 15 and 20 percent of the seaborne export market, according to researcher AME Group.
Iron ore with 62 percent content in Qingdao rose by 0.3 percent to $83.53 a dry ton on Feb 8, according to Metal Bulletin Ltd. The commodity touched a two-year high last month.
Hurdles from securing finances to displacing China's homegrown magnetite supplies also present challenges to South Australia's dream of reviving its iron ore sector. The state saw the nation's first mining of the material in the late 19th century and sent cargoes to markets including the United States, the Netherlands and Japan.
The existing market for magnetite exports is well supplied and hasn't shown major growth, though higher-quality material is likely to be required in the future, according to Fortescue Metals Group Ltd.
Brazil’s Vale the world’s No.1 iron ore miner, reached a new output record last year, producing 349 million tonnes of the steelmaking ingredient, thanks partly to the opening of its massive S11D mine, its largest-ever operation.
The figure, which beat Vale’s own guidance of 340-350mt, was also a result of a strong performance at its mines in northern Brazil, the company said.
Output for the fourth quarter, in turn, was up 4.5% to 92.4 million tonnes, compared to the same period the previous year, which meant full-year production climbed 1%, Vale said.
The Rio de Janeiro-based company noted it had continued reducing costs and output at its mines in the south-eastern state of Minas Gerais. At the same time, it has boosted production at its operations located in northern Brazil, where costs are lower and quality higher.
Vale, which cut the ribbon on the massive state of Pará-based S11D in December, said the mine should be operating at full tilt next year. By then, the amount of iron ore being dug will be enough to fill 225 Valemax ships — the largest cargo carriers in the world.
Just to put that in perspective and quoting Breno Augusto dos Santos, the geologist who helped discover the mine, the massive asset will enable Vale to remain the iron ore market leader for at least a century.
And that is only considering the “D” block of the deposit. There are three other blocks at S11 that can be exploited later: A, B and C.
The entire S11 deposit has a mineral potential of 10 billion tonnes of iron ore, while blocks C and D have reserves of 4.2bn tonnes, Vale said last month during the mine opening.
S11D, also known as Serra Sul, will add 90m tonnes of annual capacity to Vale’s output by 2020, or about 20% of its expected output for that year.
The timing seems perfect, as the commodity has carried last year’s bullish momentum into the start of 2017, with prices rallying amid speculation that China’s demand for overseas ore will hold up even as the world’s largest miners, such as Vale, bring on new capacity.
On Thursday, import price for 62% iron content fines at the port of Qingdao traded slightly down than in previous days, losing 99 cents to $90.06 per tonne, according to The Metal Bulletin Index.
The steelmaking has more than doubled its value over the past year following near-decade lows of $38 a tonne in December 2015, but analysts insist a correction is just around the corner.
In a note Thursday, BMI Research said prices will remain high over the next three-to-six months, easing by mid-year due to oversupply and record-high Chinese stocks of both steel and iron ore.
Vale, which is also the world’s largest nickel producer, said output of the metal increased by 7% in 2016 from the previous year, a company record attributed to stronger performance at its plants in Canada and New Caledonia.
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.