Winter Demand Weakens, Stunting Growth of Chinese Steel, Iron Ore

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Cold-rolled steel

China steel and iron ore futures fell on Tuesday, wiping out the gains seen late last week, with little sign of any new policy support for a market now entering its seasonal lull.

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A combination of expanding supplies and weakening demand growth in China, the world’s biggest steelmaking country, has prompted several investment banks to cut their 2015 iron ore price forecasts, with JPMorgan Chase slashing its estimates by 24% to an average of $67 per ton for next year.

Many Chinese steel mills have become profitable due to the rapid fall in raw material costs, including iron ore, but traders warn the situation could be temporary, with no indication that China’s oversupply problems are being addressed.

On Monday, December 15, Chinese slab jumped up 2.6%, landing at CNY 3,233 ($523.17) per metric ton and making it the day’s biggest increase. Chinese HRC saw its price rise 0.7% to CNY 3,090 ($500.03) per metric ton. The price of Chinese coking coal saw little movement at CNY 1,080 ($174.77) per metric ton. The price of iron ore 58% fines from India hit a high price of CNY 840.00 ($135.93) and a low price of CNY 840.00 ($135.93) per dry metric ton.

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For the fifth day in a row, the cash price of steel billet remained essentially flat on the LME at $500.00 per metric ton. The steel billet 3-month price was unchanged on the LME at $480.00 per metric ton.

The 3-month price of the US HRC futures contract saw a 0.8% decline to $612.00 per short ton. The spot price of the US HRC futures contract saw little movement on Monday at $614.00 per short ton.

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