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 on April 24th that Hebei Province principally passed Advices on Implementation of National Revitalization Plan in Steel Industry and underlined the point that the percentage of strips was expected to fall down to 10% which might be altered in the formal advices.

Local industrial experts said “To cut the percentage of strips is looked as one of the major problems involved in the advices and generally reflects the intention to regenerate steel industry in Hebei.”

Mr Song Jijun deputy chairman of Hebei Metallurgical Industry Association said

1. Hebei is to adjust the product mix in consideration of the advices of decreasing strips.

2. Hebei is to control total capacity and eliminate obsolete capacity the effective way to control capacity is to sweep out outdated facilities.

He said that according to the calculation, the superfluous capacity nearly reached 21 million tonnes in the province last year. As learned, the capacity of Hebei Steel Group, the 2nd largest steelmaker in China, only recorded at 33 million tonnes last year not too much compared with the superfluous.

However, the target of 10% will be changed, since demands turned better. Mr Song noted strips could be wildly used to make furniture and agricultural mechanics, and those markets are rebounding at present.

Mr Song further noted, “Large mills, boasting technology and capital, should take over businesses of high-end products, while small ones focus on new, special or quality products to improve market shares. He said that in detail, large mills can pin attentions to develop imported products which unable to be churned out in China high end products and special products for national projects, like quality heavy plate for aircraft carrier.”

Mr Song said “For small mills, they should approach the market to decide what to produce, rather than just follow the mainstream.”

The province heads to develop auto steel, special steel and H-beam steel while decreases the shares of strip steel, one of low-end products. And, Hebei Jinxi Steel is picked out to example the advantage of producing high-end products, since the mill, together with the other two largest makers of H-beam steel, carried out production reduction and successfully pulled up H-beam price from CNY 3050 per tonne in March to CNY 3550 per tonne in May.

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.

The ongoing iron ore price negotiation between China Iron and Steel Association (CISA) and Rio Tinto is scheduled for conclusion this month, according to Luo Bingsheng, vice chairman of CISA.

Rio Tinto announced Tuesday it already had reached an agreement on iron ore price cut with Taiwan’s leading steel makers China Steel Corporation and Dragon Steel Corporation since its successful deals with the Japanese and South Korean steel producers.

Currently, almost all steel manufacturers in Asian region except for those in China have inked agreements on new iron ore prices.

Luo urged a fall of iron ore contractual prices to the level of 2007 or a drop of at least 40 percent.

“The Chinese iron ore market will be oversupplied by more than 200 million tons this year if steel enterprises and traders continue to purchase iron ore from abroad,” he said.

A survey shows that iron ore stocks at China’s major ports have surpassed 70 million tons, including a large amount for steel enterprises such as Baosteel and Sinosteel.

According to Hu Yanping, an analyst with Umetal, if CISA follows the price cut reached between Rio Tinto and the Japan’s Nippon Steel Corp., the Chinese steel enterprises’ production cost will fall 128 yuan/ton without regard to freight and import from Brazil, compared to a drop of 268 yuan/ton given that CISA achieves its target of a 42 percent price cut for fine ore and a 45 percent price cut for lump ore.

A senior manager with Heibei Iron & Steel Group noted that iron ore prices still have room to dip.

Officials with Shougang Group and Wuhan Iron and Steel Group held that the current iron ore prices still hover at a high level and fail to reflect the actual market demand.

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.

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.”