It is reported on Tuesday’s China Daily that Jiangsu Rongsheng Heavy Industries Co., China’s biggest private shipbuilder, had won an order to build four vessels (it will be delivered by the end of 2011 or beginning of 2012) worth 484 million U.S. dollars for Oman Shipping Co..

The deal was the biggest foreign order by a Chinese shipyard this year and also the second largest in terms of value Chinese shipbuilders clinched so far this year, only next to a 2-billion-U.S. dollar order won by Zhoushan Jinhaiwan Shipyard Co. Ltd. from a Chinese shipping company.

However, industry analysts said such remarkable new orders do not mean recovery of shipbuilding industry in China because many other shipyards in the country have not received any new order this year.

According to statistics from the Ministry of Industry and Information Technology, new orders placed with the 1,791 major shipbuilders in China decreased by 96 percent year-on-year to 1.18 million dead weight tons (DWT) during the first five months, among which 190,000 DWT were placed in May.

It is reported that Chinese enterprises were waiting  for overseas M&A gasped at the failure of Chinalco-Rio deal, but apparently, they didn’t decide to slow down the paces.

Days ago, WISCO invested USD 240 million to acquire a 19.9% stake in the Canadian mining company and China Minmetals also successfully merged Australian Miner OZ Minerals. However, experts told Securities Daily that overseas acquisition can hardly leverage current impasse of iron ore talk. China had better cut steel output and enhance centralized purchasing to improve pricing power in the game.

1. Domestic Enterprises Surges Out of Home for Resources

Domestic enterprises speed up expansion this year and surges out of home for resources.

For example, Sinosteel bided for Australian Midwest Co., Hunan Valin Iron and Steel Group bought AUD 1.2 billion of FMG share in Australia too CICC Lingnan companies invested in PEM, Yanzhou Coal Mining Co. has taken over Felix Resources, Zijin Mining has been involved with three overseas mining projects, Zhongjin Gold merged Jinshan Gold Mines listed in Canada and Jien Nickel got 19.95% of Australia’s Metallica Minerals.

Although Chinalco investment in Rio was held back, WISCO still successfully poured USD 240 million in Canada listed Consolidated Thompson on June 9th. Two days later, Oz Minerals agreed 100% asset sale to China Minmetals.

Statistics showed that 80 million tonnes of the total iron ore import is shipped from China-invested mines. Since February 2009, China’s steelmakers and trading companies have strengthened investment on overseas mines especially biding for stakes. According to current paces, China is expected to get over 100 million tonnes of ore resources at abroad.

An analyst of Citic Securities said “This rush of M&A at abroad should be attributed to metal price plunge in last 4Q and credit crisis, which provides opportunities for Chinese corporations to expand at low cost.”

2. To Enhance Centralized Purchase is the Key

Generally speaking, stable self sufficiency and enlarging joint mines at abroad should have increased advantages to China in the dead iron ore talk, but people hold different ideas.

Some insiders said overseas M&A can hardly tackle the negotiation problem in the near future. China should learn the experiences from Japan to unify opinions and centralize purchase in the iron ore talk.

Ping An Securities pointed that at present, China annual iron ore import from mines that Chinese firms invested takes over 12% of the total import, but Japan’s reaches 53.8%. So, Japan certainly could bear higher term prices than China.

In experts eye if domestic mills desire the real pricing power in the negotiation, they must merge or acquire overseas resources step by step to complementary benefit for each other. Besides, mills should also consolidate themselves, cut steel output to change over-capacity situation in order to reduce the waste of iron ore.

Moreover, we should improve cooperation and cohesion with Japan and South Korea mills to hedge out risks from international iron ore price changes. Meanwhile, to seek support from WTO is also needed. The organization can help to protect fairness in the market by just investigation and settlement.

A spokesman of Rio Tinto said on this tuesday that Rio Tinto Ltd/Plc has begun to restart some capacity (but not starting up to full capacity at this point) at its Tiwai Point aluminium smelter in New Zealand, shut for repair late last year after equipment failure.

In early November last year, the company said output at Tiwai Point had been cut by the equivalent of about 8,500 tonnes per month or 100,000 tonnes per year (tpy) following the failure of an electrical transformer.

Market conditions would determine when the pot line at the 350,000 tpy smelter, producing high purity aluminium for niche markets, would return to full capacity, the spokesman said.

Production at the plant was also curbed from last May to conserve electricity, but improved power supplies allowed the company to restart that output from early October.

Around 15 percent of the world’s global aluminium smelting capacity lies idle because of the slump in demand from the key construction and transport industries.

That figure was nearer 20 percent at one point, but a substantial amount of shuttered capacity in China has since been restarted.

Since early January this year, at 1304 GMT the London Metal Exchange (LME) three-months aluminium price MAL3 was indicated at $1,637/47 a tonne, around its highest.

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.

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.”