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Ore price dives in China

By Yu Hongyan (chinadaily.com.cn)
Updated: 2008-09-03 15:04

Domestic ore prices experienced a dramatic decline due to weakened demand and vigorous growth in supply, according to the business forecast released by the Department of Market Operation Regulation of the Ministry of Commerce. And the future price is expected to spiral downward, the Xinhua News Agency reported today.

The monitoring survey shows that ore prices average 1,370 yuan ($200.16) per ton at the end of August, 12.2 percent lower than that at the beginning of the month. Market demand has decreased, while the ore supply remains abundant.  

The downturn of demand in the domestic market is dragging down the price of burden materials like pig iron and scrap steel. Conversion iron in Tangshan, Hebei province was quoted at 4,300 yuan per ton at the end of August, 500 yuan below that of the end of June. On the other hand, steel output in China has fallen with a domestic output of crude steel of 44.89 million tons in July, 4.4 percent down from a month before. 

Statistics show that, from the first half to July, crude ore output in China hit 460 million tons, up 23.1 percent year on year, with the import of iron sanding at 270 million tons, growing 21.8 percent from the same period last year. 

The ore giant BHP Billiton declared on August 24 that it would increase its output by 10 percent in the year to come, which means a stable increase in ore supply. 

The rapid increase in ore supply is the main force affecting its lowering  price , said a spokesman from the ministry.  

Profit upsurge in ore exploitation drew investment in this area. Statistics show 25.24 billion yuan was pooled in the urban ferrous metal mining and dressing industry in the first half, 59.1 percent higher than the figure from the same period last year, compared with the 23.0 percent increase in the downstream ferrous metal smelting and rolling industry. The weakened downstream demand is another reason for the ore price dip.

Baosteel, China’s largest listed steel mill and the vane in the industry, announced it will lower most of its product prices in the fourth quarter, which, according to experts, provides room for further price reduction in the market.