TPT September 2009

G lobal M arketplace

expected to show a further profit in the second half as prices recover in the global steel industry. On 20 July cold-rolled stainless steel was trading at around $2,550 a metric ton in China, up some 36% from April lows. › As for China itself – the world’s largest steel producing nation, generating some 35% of total global demand – some contrarian sentiments about steel production have already been expressed by a spokesman for the Ministry of Industry and Information Technology. According to Bloomberg News, Zhu Hongren said at a conference on 22 June in Beijing that China should act now to contain runaway growth in the domestic steel industry by withholding project approvals. Citing figures published by the China Iron and Steel Association (CISA) for 2008, Mr Zhu reiterated that China’s demand for steel is about 500 million metric tons per year. Its production capacity is 660 million mt per year. Bloomberg’s Eugene Tang, in Beijing, noted that crude steel output in China rose to a record 266.6 million mt in the first half as the nation’s huge stimulus package spurred demand from builders and car makers. Annualised, this exceeds the output of 460 million mt projected by CISA for this year. “The industry must produce according to market needs, and avoid adding to excess capacity,” Mr Zhu said. “They should avoid reckless investments. The government must also take action to curtail additional investments by companies that are already in excess.” Changes in the way iron ore is bought and sold may be on the way At this writing, China’s 5 July detention of four executives of Rio Tinto, the multinational mining group based in Britain and Australia, has not been resolved. It is not even clear whether the charges relate to criminal activity or to espionage, corporate or otherwise. What is definite, however, is that Rio Tinto sells about half its iron ore on the spot market; and China, the world’s largest customer for iron ore, vital to steel making, has been pressing mining companies to slash their ore prices. In the Asia edition of the Wall Street Journal, Robert Guy Matthews reported on an unintended consequence of China’s action in the matter of the Rio Tinto employees: acceleration of a drive by steel makers and miners alike for greater transparency in the ore market. (“Industry Pushes New Iron-Ore Pricing Plan,” 20 July) The proposed agreement – which could be in place by the New Year, according to miners and steel makers prepared to say even that much about the developing deal – would set iron-ore contract prices on a quarterly rather than, as now, an annual basis. Quarterly sales would likely mean more volatility in global steel prices. But they would enable steel makers to adjust their prices, up or down, four times in the course of a year instead of once. Mr Matthews said: “They might also be likely to rely more on market supply and demand, and less on secretive criteria, as is currently the case.” The system now in effect generally involves one miner negotiating behind closed doors with one big steel maker. While the longer-

Steel Supply and demand begin to find balance in a market driven by China Here and there – mainly within the force-field of Beijing’s $586bn stimulus plan for the Chinese economy – the price of steel is edging up in response to strengthening global demand and higher raw materials costs. And steel operations are being resumed to replenish depleted inventories. › China Steel, Taiwan’s leading steel maker, on 21 July announced plans to restart a key blast furnace in August. The No. 3 furnace, which ordinarily accounts for one-third of China Steel’s annual output of 10 million metric tons, is one of four shut down for maintenance in mid-April and scheduled for reactivation in September. A company attaché ascribed the accelerated schedule to improved demand in China, Taiwan, and the USA. “We have to act quickly once the market is faring well,” this source told Reuters in Taipei. “In fact, there is room for us to raise prices.” › A day earlier, South Korea’s POSCO announced a second domestic price increase in a month for its stainless steel. The world’s No. 6 steel maker said its prices for hot rolled stainless would rise by an additional 7.1%, to $2,387 a metric ton; for cold rolled by 6.5%, to $2,615, effective 27 July. POSCO, whose stainless steel business took a loss in the first quarter, said that the division turned profitable in April and was

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