Baosteel, Other Chinese Steel Majors Will Reap Lower Iron Ore Price Rewards

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Cold-rolled steel

Schadenfreude is a feeling China’s steelmakers should learn to enjoy. Despite their own misfortunes, their suppliers are even worse off, the Wall Street Journal reports.

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Otherwise squeezed by too much capacity and too little demand, Chinese steel mills can celebrate the 48% collapse this year in the price of their key ingredient, iron ore. In contrast, the Shanghai price of reinforcing steel bars slumped only 17%. Thanks to this gap, steel companies across Asia improved their profit margins in the September quarter.

State-run Baoshan Iron & Steel or Baosteel, as it’s better known, sells about a quarter of its volume to car makers, Citigroup’s Jack Shang told the WSJ. This higher-value product called auto sheet sells at a 60%-plus premium to the closest commoditized variety of steel. Most of the rest of Baosteel’s output goes to make machines and home appliances.

Though car sales growth is also slowing, Baosteel sells more than 70% of its auto sheet to foreign car makers who are expanding faster than the broader market. I

Next year too, iron-ore prices should fall faster than steel, partly because of the difference in what ails them.

On Tuesday, November 25, the day’s biggest mover was the 3-month price of the US HRC futures contract, which saw a 0.2% decline to $628.00 per short ton. For the fifth consecutive day, the US HRC futures contract spot price held flat at $634.00 per short ton.

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Chinese steel prices closed flat for the day. The price of iron ore 58% fines from India hit a high price of CNY 840.00 ($136.78) and a low price of CNY 830.00 ($135.15) per dry metric ton. The price of Chinese HRC saw little movement at CNY 2,970 ($483.60) per metric ton. For the fifth day in a row, the price of Chinese coking coal remained essentially flat at CNY 1,390 ($226.33) per metric ton.

The steel billet cash price saw little movement yesterday on the LME, closing out around $500.00 per metric ton. The 3-month price of steel billet remained essentially flat on the LME at $480.00 per metric ton.

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