International Steel Mills

Asian Ore/Steel Trader Provides View of Chinese Attitudes

November 5, 2015

Steel Market Update asked one of our Asian iron ore and steel trading sources to comment on the recent decline in iron ore prices which recently broke below $50/dmt on 62% Fe fines in China. We also asked for a comment about the recent spat of trade suits and the Chinese mills not cooperating with the U.S. Department of Commerce investigation. Here is what he had to say earlier today:

“Ore prices are going to hit USD40/mt CNF FO “VERY SOON” as Chinese mills are unable to survive on current levels vs the Selling Prices of Steel out of China these days.

We know for a fact that ALL of the leading Integrated Steel mills, plus the 2nd Tier Steel mill have shutdown Furnaces by 50%. This is not assisting as prices are so deflated that having the remaining Furnaces online is still at least USD3-5/mt loss on anything produced/sold. This based on the current Ore prices vs Selling price of the Steel.

Billets are being sold at USD238-240/mt FOB ST. LSD for 150mm x 150mm x 12m and USD248-250/mt FOB ST. LSD for 120mm/130mm x 120mm/130mm x 12m in ASTM A 645 Gr. 60 Thermex Quality Grade (Water Quenching Grade).

Wire Rods and Debars are being sold at USD270/mt FOB ST. LSD for 10mm and up Bar Size and with Cromium level 0.35% Max. Some regions can accept and others regions demand lower Cr with Boron added and this increases the price to USD285/mt FOB ST. LSD on Wire Rods as such high levels of Cromium in Wire Rods endangers drawing application, but not the case on Debars as they can accept the high Cromium level in Debars.

On HRC, buyers are stating that they should be paying the same price for HRC as Billets,, so you can calculate where these prices are right now… and this for 2.5mm and up thickness HRC in Structural Grade.

If nothing improves on lower Ore prices or Steel prices, there are going to be a lot of mill closures in First Quarter 2016 for sure. Mostly 3rd Tier Mills with EAF Furnaces and possibly some 2nd Tier Mills with limited Blast Furnaces as the cutbacks are not working…

On Dumping Cases, when the Chinese mills do not defend themselves or adhere to requests by Governments to curb the exports, then what is to be expected John?? When you asked me about the possible reduction in exports from China into the USA as requested by the US Government some months back, I recall my response was the Dumping Action will prevail as none of the mills were going to reduce the tonnages. You can check your emails on that…. The Chinese mills already were under the assumption that if we decrease the tonnages, we are going to get hit anyways, so why the effort to adhere?? Plus, with the number of tons being exported to the US and flagrant disrespect of the request to reduce coupled with the continued mentality of never defending or challenging the rulings legally by the Chinese Mills, they take these cases with a grain of salt (Damned if we do and Damned if we don’t mentality).

Having ridiculed the Chinese mills above and, if I may in closing John, I think these Dumping Cases reflect that Capitalism is completely out the door and the US Mills Cry Baby Attitude on Competitiveness and Free Trade heavily affects the Importers to lower cost Steel. The US Mills have cheap Raw Materials as does China and if the Buyers put their feet down and demanded that US Steel Products should be no more expensive than Imports, then the shoe would be on the other foot. Importers are just as savvy as the Mills in the US and know what International prices are due to complete Transparency now, and the Buyers should cease to provide Free Rides to the mills. Do the US Mills really think that curbing imports supported by A/D is going to keep them afloat in a sinking economy on a Global Scale?? Time to wake up and smell the roses….”