China’s steel factories are still in parleys with iron ore miners on long-term supply deals but are aiming to get prices back down to 2007 levels, a senior official with a Chinese steel industry group said on Tuesday (June 2 from Shanghai).

“The iron ore price should fall to the 2007 level. This is still our main target in the negotiation,” Luo Bingsheng, vice chairman of the China Iron and Steel Association, told reporters on the sidelines of a conference.

That would indicate a fall from last year’s levels of 40 to 45 percent.

Luo said CISA had a new proposal for the negotiations, but declined to elaborate.

In general, China steel price is comparative high then before. Hope it could down back.

China’s Ministry of Commerce (MOC) has launched an anti-dumping and anti-subsidy investigation into grain oriented flat-rolled electrical steel imported from the United States and Russia.

Grain-oriented electrical steel, also known as grain-oriented silicon steel, is used for the cores of high-efficiency transformers, electric motors and generators.

Wuhan Iron and Steel Group, China’s third-largest steel mill, is the country’s largest silicon steel producer, while Baosteel, the country’s biggest, has also started up silicon steel production to capture some of the huge demand expected from investments in the nation’s power grid.

The investigation was prompted by the Wuhan Iron and Steel Group, a company executive said. WiSCO has annual production capacity of 120,000 tons of grain-oriented electrical steel and 960,000 tons of non-oriented electrical steel.

“Imports had seriously hurt Chinese mills’ profits. Due to the price war, domestic prices have fallen to 25,000 yuan per ton this year from 45,000 yuan in the previous years,” said the executive.

On April 29, 2009, MOC received the combined application from Baosteel and Wuhan Steel (WISCO) to probe antidumping investigation toward oriented silicon steel from US. On May 27, MOC discussed with America on this issue and decide to initiate the anti-dumping investigation from June 1,2009.

The Chinese investigation comes 10 days after a U.S. trade panel gave its unanimous approval to a government probe that could lead to steep U.S. duties on some Chinese steel imports.

“The trade remedy measure is only to correct unfair trade affairs and the Ministry of Commerce will protect the interests of domestic enterprises via a trade remedy investigation,” the Chinese ministry said in a statement.

The investigation would conclude before June 1, 2010, under normal circumstances, but it could extend until Dec. 1, 2010, under special circumstances.

China steel market continues rallying after Dragon Boat Festival. According to key monitored statistics from SteelHome website, 20mm rebar and 5.75mm HRB price averaged at CNY 3613 per tonne and CNY 3531 per tonne at 28 domestic major cities on May 31st, 2009, up CNY 6 and CNY 32 per tonne respectively compared with May 27th.

Construction steel market maintains stable with low inventory

Wire rod/rebar price changes a little at home market after Dragon Boat Festival. On May 31st, 6.5mm high speed wire rod and 20mm rebar price prevailed at CNY 3520 per tonne and 3420-3430 per tonne in Shanghai market, and that stood at CNY 3520 per tonne and CNY 3600 per tonne in Beijing market, flat over that before Dragon Boat Festival. Wire rod/rebar inventory stands at relatively low level both in Shanghai and Beijing market.

6.5mm high speed wire rod price reached CNY 3620 per tonne in Guangzhou market on May 31st, up CNY 10 per tonne compared with pre-festival price, while 20mm rebar price kept flat at CNY 3650 per tonne. Wire rod/rebar inventory obviously declined and distributors faced little supply pressure as the narrow price gap between Guangzhou market and other markets slackened resources inburst, said a distributor from Guangzhou .

However, distributors generally reflected that market demand remained tepid and transaction performed dissatisfactory recently.

HRB price picks up a little as arrival cost hiked

China HRB market heads up slightly after Dragon Boat Festival as wire rod/rebar market keeps stable. Distributors have strong desires to increase their price in view of arrival cost rise, which mainly contribute to recent HRB price hike.

2.75mm and 5.75mm HRB price prevailed at CNY 3590 per tonne and CNY 3440 per tonne in Shanghai market on May 31st, 2009, up CNY 20 and CNY 40 per tonne compared with May 27th.

Distributors are expecting price hike in view of ex-works price increase amid steel mills, while market transaction slacks a little as end users are sitting on hands after price hike. However, few distributors sell goods at a low price considering of few arrivals during the festival and cost hike. It is learned that market inventory keep at relatively low level in Shanghai at present.

On May 31st, 2.75mm and 5.75mm HRB price prevailed at CNY 3650 per tonne and CNY 3450 per tonne in Tianjin market, up CNY 50 per tonne and CNY 30 per tonne compared with May 27th.

HRB price hike is mainly attributed to strong desires to increase price amid distributors when actual demand remain tepid, said a distributor from Tianjin, HRB price could maintain uptrend in later stage only if end users accept the price hike.

2.75mm and 5.75mm HRB price achieved CNY 3670 per tonne and CNY 3530 per tonne in Guangzhou market on May 31st, up CNY 10 per tonne and CNY 40 per tonne compared with May 27th. Market transaction performs tolerable, said a distributor from Guangzhou , there is limited room for HRB price to further hike in later stage considering of high inventory in Guangzhou .

Although China Iron and Steel Association (CISA) had warned of the expanding losses amid China steel industry in advance, the results published by National Bureau of Statistics embarrassed all Chinese steel mills.

Statistics data disclosed that China steel industry went through 97.5 percent year on year slump in the first four months of 2009, which showed a positive sign of industry recovery comparing with the 99.2 percent plunge in Q1 2009. Declining dropping rate should be attributed to profit increase of small steel mills instead of the extending losses in large and medium sized steel mills.

Data from CISA unveiled CNY5.179 billion losses amid 72 large and medium sized steel mills monitored by CISA in the first four months of 2009 (39.73 percent steel mills ran into losses), compared with CNY63.401 billion profit in the corresponding period last year.

In Q1 2009, large and medium sized steel mills witnessed CNY3.308 billion loss, the losses of the first two months were CNY1.511 billion respectively, March CNY1.797 billion, April CNY1.871 billion, monthly loss is on the rise, indicating a deteriorating operation of large and medium sized steel mills.

On contrary, small steel mills, got into loss in H2 2008, benefited from the 4 trillion yuan stimulus package, longs producers gained great profits, while flats manufacturers post huge losses.

Despite of overwhelming losses of large and medium sized steel mills, Chinese steel enterprises did not cutback production. Data from National Bureau of Statistics showed that crude steel production of the first four months (170 million tons) annualized 519 million tons in 2009, a significant oversupply.

Crude steel output might possibly expand in May, in the first ten days of May, daily crude steel output annualized 537 million tons of the whole year, a historical high.

Rio Tinto subsidiary Hamersley Iron has today reached agreement with Japan’s Nippon Steel Corporation on the price for Hamersley iron ore deliveries for the contract year commencing 1 April 2009.

Under this agreement, the new prices for Hamersley products will be:

Pilbara Blend Fines
US cents 97 per dry metric tonne unit

Yandicoogina Fines
US cents 97 per dry metric tonne unit

Pilbara Blend Lump
US cents 112 per dry metric tonne unit

Rio Tinto Iron Ore chief executive, Sam Walsh said: “Rio Tinto is pleased to reach this agreement today with Nippon Steel Corporation, Japan’s leading steelmaker.

“We believe this settlement is a realistic outcome for both parties – one that reflects the global market for iron ore and the current challenging market conditions facing our customers.”

It is reported that losses for Chinese steelmakers are worsening, and China Iron & Steel Association said that losses for 72 large and medium sized steel firms posted at CNY 1.87 billion in April with mills posting red ink increased by 4 from March.

The steel association said the low steel price is the main reason behind the loss, since it has fallen to 1994 levels. And insiders have diverged over the price trend in future.

1. Mills Suffer CNY 1.87 billion loss in April

Mr Luo Bingsheng vice-chairman of CISA said Chinese steel mills suffered a combined loss of CNY 5.179 billion in the first four months of this year versus the nice gain of CNY 63.401 billion in the corresponding period of last year. He said that totaling 29 steel producers have incurred losses in the month up 4 mills from the month before. And Baosteel president speculated at last weekend that China mills may post loss for whole 2009 in light of the persisting excessive supply.

2. Steel Prices touch new low

Mr Luo said China’s composite steel price index posts at 95.56 by late April off 34.76% or 50.92 from 146.48 posted by the end of April 2008. He said that “The overall price trend is heading downward.”

And according to the vice chairman the mounting up supply is the root cause for the supply outstripping demand amid the faltering consumption.

3. Prices May Move up later amid Demand Pickup

Mr Luo said despite the low steel prices, Mr Luo still holds a bright view about future trend. China’s steel prices would claw back some losses amid the picking up demand stimulated by Beijing’s economic recovery packages.

Mr Li Xinchuang from China Metallurgical Industry Planning & Research Institute said “Beijing’s efforts have taken effects, this coupled with the midseason in May and June would push up steel demand considerably in future.”

CISA data shows the apparent crude steel usage in the first four months posted at 170 million tonnes up by 6.92% or 11.03 million tonnes from a year ago.

Mr Nie Xiuxin analyst from Ping’an Securities noted that “Monthly apparent steel use in March and April is 10 million tonnes higher than that in February reflecting the picking up of down-steam demand.”

He said that “The high stocks pressure was also eased by the rising demand, with inventories at steel mills by late Mar registering at 8.25 million tonnes down 0.9% from last month and making up 26.2% of total production.” The figure is approaching normal levels.

Mr Xu Xiangchun senior analyst of Mysteel.com said it is merely a midseason driven demand rebound, and it is not confined to pick up in the second half. He said that “Steel prices would linger at low levels in late market since there is no upward momentum for prices to head upward.”