By Bloomberg News - May 21, 2012
Iron ore and coking coal buyers in China are seeking to defer importing cargoes as domestic steel mills reduced output amid lower prices, according to Mirae Assets Securities Co.
“Moderately improving demand can’t keep up with the surge in steel capacity, leading to falling prices and forcing steelmakers to cut output,” analyst Henry Liu said by phone today from Hong Kong. “We started to hear of such deferrals in the past month.”
China’s crude-steel output soared to a record 61.58 million metric tons in March and declined 1.6 percent to 60.57 million tons last month. Steel prices fell for a fifth-straight week to 4,227 a ton on May 18, according to researcher Beijing Antaike Information Development Co., as April industrial production, new yuan loans and trade figures all missed economists’ estimates.
“We learned from major trading firms that the execution of long-term contracts are stable, while spot market deals have been declining in recent years,” Jim Lin, a Beijing-based analyst at Wood Mackenzie Ltd., said by phone. “We can’t say at this point that such deferrals will become the market trend.”
Iron ore with 62 percent iron content delivered to the Chinese port of Tianjin fell to $131.30 a ton on May 18, the lowest since Dec. 19, according to a price index compiled by The Steel Index Ltd. Iron ore is measured in dry tons, or metric tons less moisture. Tianjin port moisture can account for 8 percent to 10 percent of the ore’s weight.
The Financial Times reported today that buyers of iron ore and thermal coal are asking traders to defer cargoes and are defaulting on their contracts in some cases, citing undisclosed trading houses.
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