Slowing property investment and weakening
manufacturing have dragged down Chinese steel demand this year, according to an
industry report.
Chinese domestic demand for steel will fall by
4.8 percent year on year to 668 million tonnes in 2015, said a report released
by China Metallurgical Industry Planning and Research Institute.
Steel demand will continue to shrink in 2016,
dropping 3 percent year on year to 648 million tonnes, said the
report.
Globally, the world steel demand will fall by
2 percent in 2015 and 0.9 percent in 2016 to 1.51 billion tonnes and 1.5 billion
tonnes, respectively.
Meanwhile, slowing steel demand has in turn
reduced profits for steel makers and forced small players to exit the
market.
China’s large and medium-sized steel mills
suffered a loss of 72 billion yuan (11.34 billion U.S. dollars) in the first ten
months of 2015, according to China Iron and Steel Association
(CISA).
Source: Xinhua
Commodities rout deepens as Chinese
trade data signal weaker demand
The accelerating rout in commodity prices has piled pressure
on energy and resources shares in Asia Pacific amid more signs of slowing demand
from China.
Although oil prices pushed back on Tuesday from seven-year
lows, stock markets around the region felt the pain from uncertainty about
global growth and the likely rise in US interest rates later this
month.
The Nikkei index in Japan was down almost 1% on Tuesday and
the Shanghai Composite and Hang Seng indices were down more 0.9% and 1.6%
respectively. In resource-rich Australia, the ASX/S&P200 benchmark had a
volaltile day but bears had the upper hand by the afternoon with the index off
0.91% at the close with the big oil and gas and mining companies bearing the
brunt.
“Beyond the December hike, investors are concerned about the
lack of Chinese demand which is acting as a millstone around the neck of risky
assets and most investors will stay away until they see a clearer direction on
rates,” said Cliff Tan, east Asian head of global markets at Bank of
Tokyo-Mitsubishi UFJ in Hong Kong.
Data showed on Tuesday that China’s exports fell by a
more-than-expected 6.8% in November from a year earlier, their fifth straight
month of decline. Imports fell 8.7%, which was not as much as expected but
enough to signal continued weak demand from the world’s second biggest
economy.
Analysts were unsure if the numbers signalled a possible
improvement in Chinese domestic demand, which has been a key factor in driving
world commodity prices to multi-year lows.
“The big picture hasn’t really changed that much. The US is
doing okay, but the problems with emerging markets are really quite big,” said
Kevin Lai, chief economist Asia Ex-Japan at Daiwa Capital Markets in Hong
Kong.
“Imports have been slumping for more than a year now, so the
year-on-year figures are benefiting from a much lower base, which statistically
we should expect. But I’m not so sure the number today reflects a real
fundamental change for the better in import demand.”
Brent crude futures were up 27c at $41 a barrel on Tuesday
morning, lifting from the seven-year lows reached on Monday. US crude was
trading at $37.77 a barrel at 0300 GMT, up 12c from its last
settlement.
Opec’s decision to keep production at near-record levels in an
oversupplied market has spooked investors grappling with reduced demand from
China, the world’s biggest energy consumer.
The decline in oil has spilled over into other industrial
commodities with iron ore continuing its fall below the $40 per tonne barrier to
$38.90. Copper steadied its slump thanks to the slightly better China import
numbers but nickel and aluminium prices were weaker.
Underlining the cautious outlook for China, a Reuters poll of
Japanese firms showed deep pessimism about near-term Chinese growth prospects,
with 79% saying they do not expect to expand business there next
year.
Japan’s Nikkei had earlier bucked the trend ojn other markets,
rising 0.3% before turning lower on the day, after revised data showed Japan had
dodged a recession in the third quarter, with GDP up an annualised 1%, compared
to a preliminary reading of a 0.8% fall.
Australia, whose three biggest exports are iron ore, coal and
natural gas, felt the pain sharply in its large resource sectors.
BHP Billiton and Rio Tinto, who along with the Brazilian
company Vale, dominate the iron ore trade to China, were sold. BHP, which is
also listed in the UK, fell more than 5% to a fresh 10-year low of $17.05. Rio
was off more than 4%.
“The selling has really turned up and the energy and materials
sectors are getting slammed,” said Michael McCarthy, chief market strategist at
trading firm CMC Markets.
The strengthening of the US dollar ahead of a likely Fed rate
hike put pressure on the Australian dollar which fell 0.5% to
US72.22c.
Source: The Guardian
IODEX iron ore index hits record low of
$39.30/dmt on bearish steel
Seaborne iron ore prices hit a historic low Tuesday, with the
IODEX index hitting $39.30/dry mt CFR North China on the bearish situation in
the Chinese steel industry, sources said, adding that they expect ore to stay
below $40/dmt in the short term.
Platts assessed the 62% Fe Iron Ore Index, or IODEX, at
$39.30/dmt CFR North China, down $0.20/dmt on the day, after being below $40/dmt
for the past three sessions.
Since the start of the year, IODEX has fallen $32.45/dmt, or
45.2%, and Tuesday’s assessment represents the lowest since Platts started
assessing the index in June 2008.
Continuous steel production cuts have curbed end-users’ buying
appetite, especially for seaborne cargoes.
To mitigate price risk in a falling market, most steelmakers
prefer to buy port stocks hand to mouth instead.
Surging port stocks are providing plentiful choices for mills.
Quayside volumes of iron ore at major ports in China were 90.68 million mt
Tuesday, up around 10 million mt from early September.
Tight bank credit for the steel industry has also dampened
demand for iron ore.
A Beijing-based trader said it was taking longer for some
mills to open letters of credit or the banks were requiring a higher percentage
of the cargo value as a deposit.
The usual winter slowdown in construction has resulted in
end-users having difficulties obtaining downstream orders. Mills have to cut
their steel prices to offload inventory and maintain cash flow.
The physical steel square billet price in Tangshan, a
barometer of steel fundamentals in the key production hub of the country, fell
to Yuan 1,470/mt ($229.41/mt) Tuesday. This is only Yuan 10 above the 10-year
low and down 31.9% from January 2.
China’s large and medium-sized steel mills suffered an
accumulative loss of Yuan 72 billion in January-October, according to China Iron
and Steel Association (CISA).
Additionally, the losses are causing many mills to consider
production cuts. Market participants say a rebound in the steel market is
unlikely in winter.
As a result, many steelmakers were also heard to be offering
their own contractual iron ore volumes on a spot basis, further adding to the
glut in the seaborne market.
Source: Platts
China’s iron ore imports surge 22 pct in
November
Chinese iron ore imports surged 22 percent in November from a
year earlier, customs data showed, as big miners in Australia and Brazil won
market share even as steel output cuts push the price of the raw material
lower.
November shipments rose to 82.13 million tonnes, data from the
General Administration of Customs showed, also up 8.8 percent from the previous
month, although imports for the first 11 months were up just 1.3 percent from a
year ago.
Cooling economic growth in China, the world’s top producer of
steel, has already hit industrial demand and steel mills are expected to step up
production cutbacks as losses deepen.
“We aren’t seeing any restocking activity going on now but
certainly the additional growth that we continue to see in capacity in Australia
is lending itself to stronger imports and the continued closure of domestic iron
ore mines in China is supporting that,” said Daniel Hynes, senior commodity
strategist with ANZ.
“There would certainly be a component of opportunistic buying,
but considering the weakness in the steel market in China, it’s hard to see how
that type of support would be sustainable.”
Shanghai steel futures have tumbled 40 percent since the
beginning of this year. Slower demand from China and rising supplies from top
miners have dragged down spot iron ore prices .IO62-CNI=SI by 45 percent so far
this year.
China’s crude steel output will fall for a second straight
year in 2016, as a cooling economy hurts demand in the world’s top producer,
underscoring the bleak outlook for the steel and iron ore sectors.
Steel product exports slid 1.1 percent to 9.61 million tonnes
in November from a year ago, but total exports for the first eleven months
jumped 21.7 percent to 101.7 million tonnes from a year ago.
Weak domestic demand has driven Chinese steel mills to boost
sales abroad.
Source: Reuters
Iron ore wallows under $40 as weak steel
foils China restocking
Spot iron ore fell to a fresh decade-low below $40 a tonne on
Tuesday and softer futures suggest further weakness, with iron ore already down
by nearly half this year amid a global glut. China’s iron ore imports rose 8.8
percent in November from the previous month to 82.13 million tonnes, customs
data showed, although the spike must have been due to some “opportunistic
buying” as prices fell, said Daniel Hynes, senior commodity strategist at
ANZ.
“We aren’t seeing any restocking activity going on now but
certainly the additional growth…in capacity in Australia is lending itself to
stronger imports and the continued closure of domestic iron ore mines in China
is supporting that. “The buyers are certainly not chasing the cargoes at the
moment.”
Benchmark 62-percent grade iron ore for delivery to China’s
Tianjin port fell 1.3 percent to $38.90 a tonne on Monday, according to The
Steel Index (TSI). It was the lowest on record by TSI since it began collecting
data in 2008. Under the annual pricing regime that preceded the spot-based
system, it was the lowest since 2005, based on data compiled by Goldman
Sachs.
While there’s “plenty of scope” for the price to fall further,
big, low-cost producers such as Vale and Rio Tinto are unlikely to reduce
production, said Hynes.
“Clearly the high cost producers such as the Chinese iron ore
miners are feeling the pinch and we’re seeing those shut. But for the majors I
don’t see any production cuts coming in the foreseeable future,” he said. Iron
ore has dropped more than 45 percent this year, almost what it lost in all of
2014, as global miners from Australia to Brazil kept boosting output while steel
demand in top buyer continued to shrink. That has forced many steelmakers across
China to curb output or shut completely amid widening losses.
Pointing to further losses, iron ore futures in China slipped
again after rebounding on Monday. The most-traded May contract on the Dalian
Commodity Exchange was down 1 percent at 289.50 yuan ($45) a tonne by midday.
January iron ore on the Singapore Exchange also dropped.
Rebar and iron ore prices at 0414 GMT
Contract Last Change Pct
Change
SHFE REBAR MAY6 1657 -4.00
-0.24
DALIAN IRON ORE DCE DCIO MAY6 289.5 -3.00
-1.03
SGX IRON ORE FUTURES JAN 37.12 -0.10
-0.27
THE STEEL INDEX 62 PCT INDEX 38.9 -0.50
-1.27
METAL BULLETIN INDEX 39.06 -0.97
-2.42
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading
day
Source: Reuters
Viet Nam to import coal from
2017
Viet Nam will become a coal importer in 2017 of 2.3 million
tones for domestic electricity production, according to Nguyen Tien Chinh from
Viet Nam Mining Science and Technology Association (VIMA).
He made this declaration at an energy conference hosted in Ha
Noi on Thursday.
The conference aims to find solutions for the management of
science and application of advanced technologies for petroleum and coal mining
in Viet Nam.
Currently, the country’s total coal reserve is about 47
billion tones. Of this figure, the reliable coal reserve is about 3.9 billion
tones, said Le Van Duan, Deputy Director of the VINACOMIN Industry Investment
Consulting JSC.
By 2025, the volume of coal imports will be about 48 million
tonnes and in 2030 about 80 million tonnes, according to Chinh.
He said that Viet Nam could import from major coal export
countries, including Australia, Indonesia, Russia or South Africa, but each
country has its own problems.
Australia has a stable coal import policy but it has a high
investment cost. Indonesia has an advantage of transport distance but in the
future, this country’s domestic demand will increase, therefore the Indonesian
government tends to limit exports, Chinh said.
Meanwhile Russia has great potential in coal reserves but it
has harsh weather conditions and is far from Viet Nam. South Africa also has the
potential of coal reserves and low production costs but its transport
infrastructure is poor, said Chinh.
Therefore, in order to provide a stable coal supply for
domestic products, Viet Nam should build and organise an import policy and
strategy, he concluded.
Not taken seriously
The implementation of the periodic mining activities reports
of some individual organisations have not been taken seriously, said Lai Hong
Thanh, Director of Northern Department for Control of Minerals Activities in the
conference.
This has led to the difficulty of the Government in
controlling the actual coal mining output of these organisations and
individuals.
To remedy this condition, he suggested the Government must
have the statistics of the inventory of the reserves to understand the
volatility of each mineral, Thanh said.
In addition, the Government should consider establishing a
mineral fund and allocate it to the Ministry of Finance to manage. This fund
would be established by the revenues from natural resource taxes, payments for
mineral extraction rights, and revenue from auction mining rights, according to
Thanh.
Oil output
The implementation of the Enhanced Oil Recovery, or EOR, will
increase the oil mining output, thereby contributing to increased revenue for
Viet Nam, according to Pham Kieu Quang from Viet Nam Petroleum
Institute.
EOR is the implementation of various techniques for increasing
the amount of crude oil that can be extracted from an oil field.
However, this technology has not been encouraged by current
policies, Quang said.
Meanwhile, to encourage the development of EOR technology,
many countries use a policy of encouraging such as China’s tax exemption for
mineral resources while Malaysia reduced corporate income tax from 38 per cent
to 25 per cent, Quang said.
To develop EOR projects in Viet Nam, Quang suggested that the
Government should impose a natural resources tax, as well as a corporate tax
from 32 per cen to 28 per cent for increased output using EOR
technology.
Source: VNS
Rio Tinto Cuts Capital Spending Forecast
to $5 Billion Next Year
Rio Tinto Group, the second-largest mining company, cut its
capital expenditure forecast for 2016 as the producer strives to balance
shareholder returns with investing in projects.
Capital spending will be about $5 billion in 2016, down from
the company’s previous estimate of less than $6 billion, Rio said Tuesday in a
statement. Spending this year is seen at $5 billion, from a previous estimate of
about $5.5 billion. It was about $8 billion in 2014, according to
filings.
“As we approach the start of 2016, we are well positioned to
continue to provide returns for our shareholders and invest in our business,”
Chief Executive Officer Sam Walsh said in the statement. Rio last month approved
a $1.9 billion investment in a bauxite project in Australia.
The biggest mining companies, including Rio and BHP Billiton
Ltd. are slashing spending and cutting costs in an attempt to protect profits as
commodities prices slide. China’s slowest pace of economic growth in a quarter
of a century is weighing on metals to energy prices and eroding profits for
producers. Prices this month touched the lowest since 1999 and the Bloomberg
Commodity Index is heading for the fifth straight annual loss.
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