Domestic steel prices will continue to increase to absorb the pressure of rising iron ore prices.
After more than four months, Baosteel's iron ore negotiations with Rio Tinto were finalized on the evening of June 23. Although BHP Billiton has not reached an agreement with Baosteel in the end, people in the industry generally stated that BHP Billiton will basically choose to follow up the agreement reached between Rio Tinto and Baosteel.
"There is no more than expected"
After the price negotiation has reached a foregone conclusion, facing an increase of 85% in average price growth, insiders of the Wuhan Iron and Steel Group said to the Morning Post that “the price has risen too high, and this increase has brought great pressure on costs. The consequences for other steel companies are very serious.†Another vice president of a domestic medium-to-large-sized steel company also expressed the same opinion to the Morning Post. He said, "The domestic iron ore negotiations are always passive, and this result is really unacceptable."
However, they are not too surprised or completely defeated in the outcome of such negotiations. The quantity of PB fines and Yangdi fines accounted for about 85% of the imported ore volume. The import volume of lump ore was about 35%. The average increase was 85%, which is not 95% higher than what was commonly said before. The increase is even higher.
In February of this year, after Baosteel reached an annual price increase of 65% with Brazil’s Vale, Australian ore companies did not follow the usual practice and demanded that they receive freight compensation requirements based on the huge freight differential between them and Brazilian mines. In the following four months, China Steel Association (STA) has expanded and opened the longest-running negotiations on iron ore.
Guotai Junan Securities steel industry analyst Jiang? also said to the Morning Post that it seems that Rio Tinto's prices have increased significantly, but compared with the Brazilian mine's CIF price, in May, the CIF price from Brazil is 136.6 US dollars/ton. However, the CIF price imported from Australia was US$111.9/t. This price is not more expensive than the Brazilian mine.
Wang Xin, an analyst at CSC Securities and Steel Industry, stated to the Morning Post: "On June 23, PB fines, Australia's CIF price was $119.5, and Brazil's shoreline was $159.88, removing poor quality compared to Australia. The mine is still cheaper. The current supply of iron ore does indeed exceed supply, but more specifically, the quality of the Australian ore mine is good and the advantage is obvious. This high quality and low price ore is in short supply."
Steel prices have to rise
The above-mentioned WISCO’s insiders have calculated an account. “According to the increase of 65% at the beginning of the year, the cost of WISCO increased by 5 billion to 6 billion yuan. This time, the average increase has reached 85%, and the rough calculation will increase 1 billion yuan. The total cost of Wuhan Iron and Steel in 2007 is only 9 billion yuan."
Since the price of iron ore rose by 65% ​​at the beginning of this year, domestic steel products have started to increase sharply. Some analysts believe that after the iron ore negotiations have confirmed the increase, the price of domestic steel products will still rise. The above-mentioned insiders of Wuhan Iron and Steel Company also stated that the price of iron ore has gone up. As an enterprise, the increased cost will be digested and the price will not be changed.
However, Jiang Zemin expressed caution about whether the steel mills could raise prices in the third quarter. He said that the steel mills have offered so many prices. Even at this price, this year's steel prices can be completely digested. The current situation is that the circulation market is not very supportive of further price increases. Entering the third quarter, this is a traditional off-season, and the market support is less strong. These need to be determined by the market supply and demand.
After more than four months, Baosteel's iron ore negotiations with Rio Tinto were finalized on the evening of June 23. Although BHP Billiton has not reached an agreement with Baosteel in the end, people in the industry generally stated that BHP Billiton will basically choose to follow up the agreement reached between Rio Tinto and Baosteel.
"There is no more than expected"
After the price negotiation has reached a foregone conclusion, facing an increase of 85% in average price growth, insiders of the Wuhan Iron and Steel Group said to the Morning Post that “the price has risen too high, and this increase has brought great pressure on costs. The consequences for other steel companies are very serious.†Another vice president of a domestic medium-to-large-sized steel company also expressed the same opinion to the Morning Post. He said, "The domestic iron ore negotiations are always passive, and this result is really unacceptable."
However, they are not too surprised or completely defeated in the outcome of such negotiations. The quantity of PB fines and Yangdi fines accounted for about 85% of the imported ore volume. The import volume of lump ore was about 35%. The average increase was 85%, which is not 95% higher than what was commonly said before. The increase is even higher.
In February of this year, after Baosteel reached an annual price increase of 65% with Brazil’s Vale, Australian ore companies did not follow the usual practice and demanded that they receive freight compensation requirements based on the huge freight differential between them and Brazilian mines. In the following four months, China Steel Association (STA) has expanded and opened the longest-running negotiations on iron ore.
Guotai Junan Securities steel industry analyst Jiang? also said to the Morning Post that it seems that Rio Tinto's prices have increased significantly, but compared with the Brazilian mine's CIF price, in May, the CIF price from Brazil is 136.6 US dollars/ton. However, the CIF price imported from Australia was US$111.9/t. This price is not more expensive than the Brazilian mine.
Wang Xin, an analyst at CSC Securities and Steel Industry, stated to the Morning Post: "On June 23, PB fines, Australia's CIF price was $119.5, and Brazil's shoreline was $159.88, removing poor quality compared to Australia. The mine is still cheaper. The current supply of iron ore does indeed exceed supply, but more specifically, the quality of the Australian ore mine is good and the advantage is obvious. This high quality and low price ore is in short supply."
Steel prices have to rise
The above-mentioned WISCO’s insiders have calculated an account. “According to the increase of 65% at the beginning of the year, the cost of WISCO increased by 5 billion to 6 billion yuan. This time, the average increase has reached 85%, and the rough calculation will increase 1 billion yuan. The total cost of Wuhan Iron and Steel in 2007 is only 9 billion yuan."
Since the price of iron ore rose by 65% ​​at the beginning of this year, domestic steel products have started to increase sharply. Some analysts believe that after the iron ore negotiations have confirmed the increase, the price of domestic steel products will still rise. The above-mentioned insiders of Wuhan Iron and Steel Company also stated that the price of iron ore has gone up. As an enterprise, the increased cost will be digested and the price will not be changed.
However, Jiang Zemin expressed caution about whether the steel mills could raise prices in the third quarter. He said that the steel mills have offered so many prices. Even at this price, this year's steel prices can be completely digested. The current situation is that the circulation market is not very supportive of further price increases. Entering the third quarter, this is a traditional off-season, and the market support is less strong. These need to be determined by the market supply and demand.
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