29 August, 2012
Source :Commodity Online
Smaller mills have not cut production and their purchasing has fallen by 7% while large mills have curtailed purchases by 10-15% on month-on-month basis. Mills are using existing stock and purchasing less, leading to fall in prices. When small mills do implement production cuts, the impact could be larger and prices could fall to $80 levels.
BEIJING (Commodity Online): Iron ore prices have crashed further in China import markets but there hasn’t been any major decline in purchasing activity by smaller mills compared to last year, but large mills have curtailed buying activities, contributing to the decline, according to Macquarie Research.
“The price weakness is primarily being driven by destocking and that this cannot last forever – the depth of destocking has been greater than we had initially anticipated with larger mills having a greater impact than expected. This is putting continued downside pressure on iron ore prices.
Smaller mills have not cut production and their purchasing has fallen by 7% compared to 2011 August, September when there was a similar fall in prices, while large mills have curtailed purchases by 10-15% on month-on-month basis. Mills are using existing stock and purchasing less, leading to fall in prices. When small mills do implement production cuts, the impact could be larger and prices could fall to $80 levels.
Even as crude steel production is showing an uptrend in China, finished steel production has fallen.
“To further emphasise the importance of destocking and its impact on the market we outline three potential scenarios for September. The first scenario has mills continuing to reduce steel production (quite aggressively) but has them holding iron ore inventory on a days-of-use basis at the same level as August.
The result is a 12% or 90mtpa increase in the volume of iron ore purchasing MoM.”
“The second scenario is more bearish – steel production is cut by the same degree and inventory days continue to fall. The result is a 2% or 20mtpa decline in iron ore purchasing MoM.”
“The final scenario shows one way that iron ore could rebound back to $130/t – production holds at 700mtpa but mills restock iron ore back up to July levels. For a one month view, this now feels difficult and we would attribute a higher probability to the two less positive scenarios,”Macquarie Research said.
Source :Commodity Online
Smaller mills have not cut production and their purchasing has fallen by 7% while large mills have curtailed purchases by 10-15% on month-on-month basis. Mills are using existing stock and purchasing less, leading to fall in prices. When small mills do implement production cuts, the impact could be larger and prices could fall to $80 levels.
BEIJING (Commodity Online): Iron ore prices have crashed further in China import markets but there hasn’t been any major decline in purchasing activity by smaller mills compared to last year, but large mills have curtailed buying activities, contributing to the decline, according to Macquarie Research.
“The price weakness is primarily being driven by destocking and that this cannot last forever – the depth of destocking has been greater than we had initially anticipated with larger mills having a greater impact than expected. This is putting continued downside pressure on iron ore prices.
Smaller mills have not cut production and their purchasing has fallen by 7% compared to 2011 August, September when there was a similar fall in prices, while large mills have curtailed purchases by 10-15% on month-on-month basis. Mills are using existing stock and purchasing less, leading to fall in prices. When small mills do implement production cuts, the impact could be larger and prices could fall to $80 levels.
Even as crude steel production is showing an uptrend in China, finished steel production has fallen.
“To further emphasise the importance of destocking and its impact on the market we outline three potential scenarios for September. The first scenario has mills continuing to reduce steel production (quite aggressively) but has them holding iron ore inventory on a days-of-use basis at the same level as August.
The result is a 12% or 90mtpa increase in the volume of iron ore purchasing MoM.”
“The second scenario is more bearish – steel production is cut by the same degree and inventory days continue to fall. The result is a 2% or 20mtpa decline in iron ore purchasing MoM.”
“The final scenario shows one way that iron ore could rebound back to $130/t – production holds at 700mtpa but mills restock iron ore back up to July levels. For a one month view, this now feels difficult and we would attribute a higher probability to the two less positive scenarios,”Macquarie Research said.
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