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Australia's Fortescue Metals Group is in talks with several parties interested in using its rail and port to haul iron ore, the miner said on Thursday, in a move to show it is ready to let rivals use its infrastructure.
If Australia's third-biggest iron ore miner opened its rail line, that would be a game-changer for several companies in Western Australia which have promising deposits but cannot afford to build multi-billion dollar rail lines to export their ore.
Fortescue announced the talks after responding to an application from one of the aspiring iron ore producers, Brockman Mining, that may force it to provide rail access at regulated rates.
It said it was holding commercial talks with a number of parties about port and rail access, separate from Brockman's formal application.
"We're pleased with the progress of these discussions and these will not be affected by the application," Fortescue said in an e-mailed statement, but declined to identify the participants in talks.
It said Brockman's application would not affect talks to sell a stake in its port and rail unit, the Pilbara Infrastructure (TPI).
Fortescue aims to sell a stake in TPI by the end of June to help it pay down A$3 billion to A$4 billion in debt as it looks to shore up its balance sheet in a volatile iron ore market.
Atlas Iron Ltd and Flinders Mines, which have said they were in talks with a range of parties to find ways to haul their iron ore to Port Hedland, both declined to say whether they were talking to Fortescue.
Robert Kennedy, executive chairman of Flinders, said it would consider following Brockman's route, applying for access under the state code within a few months, but added that it was preferable to hold talks with Fortescue, or the owner of the rail line.
"The first thing one should do is discuss it with them. That's a much better way," Kennedy told Reuters. "We've got no need to be aggressive about anything. We're not going to achieve anything that way."
Kennedy said the outcome of the sale of a stake in TPI was being closely watched by the industry, as it would show whether Fortescue would allow an independent operator to run the rail and port, a step towards easing access for others.
Until now, Fortescue has said it does not want to give up control of its rail line and was looking to sell a stake of only around 40 percent in TPI.
Brockman is awaiting Fortescue's response on cost estimates for different sections of its rail operation, which the state will study as the basis for regulated rates.
China imported 32.28 million mt of iron ore from Australia in April, up 27% year on year and up 0.3% from March, data released Wednesday by the General Administration of Customs showed.
Australia remained the top supplier of iron ore to China, accounting for 48% of total imports in April, compared with 50% in March.
A Singapore-based trading source attributed the increase to more availability of Australian cargoes in the spot market.
China's demand for steel products climbed in April as more construction projects gained traction on warmer weather.
"Many Australian miners are expanding their output this year, which explained why we see more Australian cargoes flowing into China," said the Singapore-based trader. "And Chinese mills are also operating their furnaces at higher rate too, and that lifted demand for imported Australian cargoes too."
China's average daily crude steel output for April hit 2.1883 million mt/day, up 2.3% from March levels of 2.1387 million mt/day, according to data from the Chinese National Bureau of Statistics.
Imports from Brazil, China's second largest iron ore supplier, totaled 12.58 million mt in April, down 2% year on year but up 6.8% month on month, the data showed.
The country's iron ore imports from India totaled 1.14 million mt in April, down 71% year on year but up 2.7% from March.
China's imports from India have declined since New Delhi hiked export duties to 30% from 20% on December 30, 2011, while a ban on mining in the states of Karnataka since August 2011 and Goa since September 2012 have limited availability.
India's metallurgical coal imports are likely to grow by 8.7 percent to 35 million tonnes in 2013/14 as additions to its steel-making capacity lift demand, four traders and a steelmaker said.
India, the world's fourth-largest steel producer, is expected to add around 5 million to 6 million tonnes of steel-making capacity in this fiscal year to end-March, said an official at JSW Steel.
"In the coming years, coking coal imports will go up because of the new capacities that are coming up," said the official at the country's third-largest steelmaker, who did not wish to be identified citing company policy.
Imports in the last fiscal year covered about 40 percent of India's total metallurgical, or coking, coal needs. Domestic coal reserves of 286 billion tonnes, fifth-largest in the world according to BP, mostly consist of thermal coal, which is used in power plants.
"I expect (coking coal) imports of 35 million tonnes this fiscal year," a coal trader said, on condition of anonymity because he is not authorised to speak to the media.
India produced 49.35 million tonnes of metallurgical coal and imported 32.2 million tonnes in 2012/13, government data showed.
Steel Authority of India, which imports three-quarters of its coking coal, hopes to raise steel capacity to 18 million tonnes this fiscal year or next from 14 million currently, with its coal imports rising by 3 million tonnes to 13 million tonnes.
As for Tata Steel, "We do not expect any capacity addition before the last quarter of 2013/14," said a company official, who did not wish to be named.
"Shortage of iron ore supply in India has probably pushed back some of the demand growth (for coal imports)," said Prakash Sharma, a senior coal markets analyst for APAC at energy research consultant Wood Mackenzie.
Iron ore output fell to about 167 million tonnes in 2012/13, after a clamp down on illegal mining led to mining bans in the top producing states of Goa and Karnataka.
"Longer-term (coking coal import) demand growth is still very, very robust for India. (It) could be 50-60 million tonnes by 2020," Sharma said.
Iran's government is negotiating a tax of up to 40 percent on iron ore exports to take advantage of a surge in sales to China, aiming to replace revenue from oil and other sources eroded by sanctions.
Iran's iron ore exports to top steel producer China jumped 48 percent in the first quarter from a year ago to a level that would generate annual revenue of about $3 billion at current prices.
The government is now talking with local miners about an export tax, trading and industry sources said.
"A few iron ore cargoes were earlier banned from leaving the port as the government is looking to impose a 40 percent export duty based on free-on-board prices," said a trader in Shanghai, who imports Iranian iron ore.
The negotiations may lead to agreement on a smaller number than 40 percent to enable miners to absorb the extra costs and continue selling, given fears that the tax could otherwise end up cutting Iran's exports.
"They are putting the tax in place because the government wants to get a share of the profit. Forty percent is outrageous, but I think eventually they will come down to a more reasonable number," a spokesman for the Iran Iron Ore association said.
Several attempts to contact the Iranian ministry of industries, mines and trade were unsuccessful.
Iran's revenue from exports of oil and other goods has decreased since the United States and the European Union imposed trade sanctions in an effort to pressure Tehran about its disputed nuclear programme. The sanctions have also cut the number of its potential customers for iron ore.
As for China, traders do not expect the duty to be much of an issue in a buyer's market. Chinese demand for steel has slowed recently, which has knocked iron ore prices to their weakest in almost six months.
Iran has grown in importance to become China's fourth-largest supplier largely because India, formerly a major supplier, has constrained exports in an effort to crack down on illegal mining.
Iran exported 5.68 million tonnes of iron ore to China in the first quarter, but that still amounted to only 3 percent of China's total iron ore imports.
By comparison, China took in 89.8 million tonnes in the first quarter from Australia, its top iron ore supplier, up 8 percent on the year..
"The heavy duty would have a much bigger impact on Iran's own export business, while China should not be affected too much," a second iron ore trader in Shanghai said.
Greg Lilleyman is quitting his role in charge of Rio Tinto's Pilbara iron ore unit, the mining giant's single most important division, as part of a major executive shake-up overseen by new divisional head Andrew Harding.
The well-regarded Mr Lilleyman is understood to be taking on another role within Rio globally, most likely remaining in Perth, once he returns from a seven-week study program at Wharton Business School in the US.
A Rio spokesman would not comment.
Mr Harding, who succeeded Sam Walsh as Rio's head of iron ore in February, is understood to have yesterday informed WA-based staff of the structure of his new executive committee.
Mr Lilleyman is highly regarded within Rio and is a protégée of Mr Walsh.
It is thought Mr Lilleyman's pending departure from the iron ore unit, which he joined in 1990 with a minesite-based job at Paraburdoo, is in line with efforts by Rio to realign its management team to reflect a shift in focus from growth to operational consolidation.
As part of a flatter iron ore management structure, Michael Gollschewski will be promoted to the executive committee as managing director of the 14 Pilbara mines, alongside ports and rail boss Clayton Walker. Projects and development David Joyce takes on extra responsibilities, as does chief financial officer Paul Shannon.
Mr Lilleyman's future Rio role, and in which commodity, remains unclear given the company's Perth base is dominated by the Pilbara iron ore operations.
However, another former iron ore executive, Joanne Farrell, has taken on a global portfolio - looking after the company's group-wide health, safety, environment and communities - based in Perth.
The iron ore division, which has been the shining light in an otherwise tough Rio portfolio, has a history of producing key group executives. In addition to Mr Walsh's ascension to the top job in January - he joined Rio's board as an executive director in 2009 - the division's former chief financial officer Alan Davies took on a role of London-based chief executive, minerals and diamonds, last year and is seen as a potential successor to Mr Walsh. Mr Harding, who sits alongside Mr Davies on Rio's group executive committee, is also regarded as a potential chief executive.
Participants in the biggest Asian coal conference in Bali, Indonesia, in the first week of June will be eying whether China will continue to remain relatively passive in importing thermal coal, industry sources said Monday.
Participants in the Coaltrans Asia conference in Bali, Indonesia, to be held June 2-5 will also want to find out whether robust Indian demand for low-rank coal will be sustained.
A Singapore-based trader said that for the last six months Indonesian coal miners had been luckier than their counterparts in Australia and South Africa because Kalimantan prices, especially of sub-bituminous coals, held steady while Richards Bay and Newcastle bituminous coal prices fell.
"This current price support for Indonesian coals is coming from the Indian thermal coal buyers who are now aggressively buying low-rank coals," the trader said.
"Traders are convinced that the Indians are currently desperate to get anything from the market. The demand for power plants in India is the main driver for low rank coal," the trader said. He defined low-rank coal as material with a calorific value of 4,700 kcal/kg gross as received or below.
Traders said Indonesian low rank coals are scarce because traders have taken a long position expecting that the Indians will eventually buy everything, the Singapore-based trader said.
"At the Bali conference, I think more discussions will be focused on whether the Chinese will continue to remain passive in the import market because anything that China buys or not has a significant bearing on coal prices," the trader said.
A second trader said there would be exchange of ideas on whether China would implement a proposal to outlaw imports of some grades of lower calorific value thermal coal.
Market sources have said Indonesia is so far the largest producer and export of lower calorific value thermal coal to the Chinese market, supplying about 50 million mt of sub-bituminous grades most of which are classified by China as lignite.
The first trader said market participants would want to know how Indonesia would react to the proposed import ban and whether the Indonesian authorities would re-introduce a shelved proposal to ban the export of low- rank coals.
A third trader said there would also be discussion at the Bali conference about how to reduce the current gap in price expectations between offers for Indonesian sub-bituminous coals and bids for such material.
Although there is massive Indian demand for low-rank Indonesian coal which has supported Kalimantan prices, market participants will be curious to know whether this support will unravel once India enters the monsoon season in June and more Indonesian coal becomes available as the rains subside in Kalimantan and Sumatra.
"For the past five months, Indonesian coal producers stood firm on their prices because supply is scarce. The demand for low-rank coal is there. There were problems associated with South Kalimantan illegal coal miners which prevented between 800,000-1 million mt of coal from being sold monthly. And the rains in Indonesia presented a logistics problems," the first trader said.
"But from June onwards the weather in Indonesia will improve. The frequency of rainfall will be less. The issue of illegal miners is being resolved. There will be more coal available. How will Indonesian coal prices hold up? That is a question that people will want answers to," the first trader said.
"All this will be discussed by market players. But the main discussion will be if China's appetite for imported coal will remain staid and how long India will aggressively buy Indonesian coal," the first trader said.
Western Australia’s Economic Regulation Authority asked Fortescue Metals Group Ltd. (FMG), Australia’s third-biggest iron ore exporter, to change its pricing system after a company applied to use part of its rail.
Brockman Resources Ltd., developing the Marillana iron ore deposit, last week applied to use the Perth-based company’s line under a state third-party rail access code. Brockman’s ability to ship ore along the rail is subject to availability and commercial negotiations.
Fortescue has by today to define six pricing sections along its more than 300 kilometers (186 mile) of rail in Western Australia’s Pilbara region, the authority said in a May 17 statement on its website.
Iron ore companies in Australia’s sparsely populated Pilbara region depend on access to rail and port facilities to bring their product to market. BHP Billiton Ltd. and Rio Tinto Group, Australia’s two biggest exporters, don’t allow other groups to use their infrastructure. Under a Western Australia state rail access code, companies can seek to ship on railways built after 2000.
Brockman plans to use a section of Fortescue’s rail from 2016 to ship 20 million metric tons annually through the proposed North West Infrastructure facilities at Port Hedland, it said last week in a statement.
Fortescue last week said it welcomed talks for third-party access on a commercial basis. Separately, the company is in talks to sell non-controlling stakes in its port and rail assets to cut debt.
Brazil iron and steel maker CSN posted a net income of Real 16.31 million ($8.05 million) in the first quarter of the year, down 95% from Real 316.13 million in Q4 2012, the company said in its financial report.
Compared with the same quarter in 2012, net profit in Q1 2013 decreased 82% from Real 92.63 million.
Revenue in Q1 2013 totaled Real 3.64 billion, 18% lower than in Q4 2012. However, compared with the same period last year, revenue increased 6%.
The company said its results were hurt by charges of Real 527 million, mainly due to interest on loans and financing totaling Real 480 million.
Crude steel production reached 1 million mt in Q1 2013, 8% below that of the previous quarter and 13% lower than in Q1 2012. Meanwhile, steel shipments in Q1 2013 reached 1.32 million mt, up quarter on quarter and year on year by 3% and 17%, respectively.
CSN's mining division reported a 43% decline in its 2013 first quarter revenue to Real 747 million, compared with the previous quarter.
EBITDA totaled Real 326 million, also down 43% from Q4 2012.
"(Mining revenues fell) due to lower volumes sold, partially offset by higher prices in the quarter", the company said.
Sales of iron ore products totaled 4.1 million mt in Q1, down 35% from the previous quarter. Of the total, 2.2 million mt were shipped by Namisa, which is 60% owned by CSN. The remaining 40% is held by Japanese steel companies Nippon and Sumitomo.
CSN said its own ore consumption stood at 1.3 million mt in the quarter.
CSN's results report said iron prices were up, with Platts' Fe 62% CFR China index averaging $148.40/dry mt in Q1 2013, 21% higher than in the previous three months.
"The iron ore quality premium hovered between $2.30 and $2.70/dmt per 1% of Fe content, while freight costs on the Tubarao/Qingdao route averaged $17.81/wet mt," CSN said.
CSN said Brazil's iron ore exports accounted for 27.5% of the seaborne market in Q1, totaling 68 million mt, 30.3% lower than in the previous quarter.
China is looking to set quality standards for both imported and domestic traded thermal and coking coal and bar the import and domestic delivery of coal that do not meet the new standards, according to a draft regulation from the National Energy Administration.
The NEA is preparing the new regulation with the aim to reduce air pollution, and is now in the process of seeking feedback from the coal industry, market sources said.
Proposed quality standards for imported thermal coal, or thermal coal to be "delivered in long distance," are: maximum 25% ash on dry basis, maximum total sulfur content of 1% on dry basis and net calorific value of no less than 19 mega joule/kg (4,540 Kcal/kg), according to the draft.
The draft however, did not give a definition on "long distance."
As for domestic traded coal, the proposed specifications for domestic traded thermal coal are: maximum 40% ash on dry basis, a maximum total sulfur content of 3% on dry basis, no more than 20% total moisture, and net calorific value no less than 15 MJ/kg (3,584 Kcal/kg).
This means domestically produced thermal coal that do not meet the proposed quality standards for coal imports will need to be traded and consumed locally within its region of production, through the use of clean technology such as desulfurization.
For coking coal, the draft has set the quality standards for all coking coal traded in China at a maximum 12% ash content, no more than 1.75% of total sulfur and maximum 12% total moisture content.
The proposed standards are applicable to both domestic and imported coking coal and is seen as a move to stop Chinese traders from importing un-washed or high-sulfur coking coal, market sources said.
"The draft is generally targeting at thermal coal, so at this early stage, the central government officials are asking for feedback from miners and power plants," a source at large state-owned mining company said.
A purchasing manager at a large state-owned mill and two sources with large international coking coal trading companies said they had not been invited for discussions yet.
An industry analyst who had taken part in the discussion with government officials said that he thought the rules need to be further modified, as "people can just import coking coal under the name of thermal coal," he said, adding that some thermal coal importing companies and power plants were resisting strongly.
"But the government is determined," the mining source said, adding that "the industry can only fight for a lower standard."
The mill purchasing manager said he was not worried about the new proposed standards as they are already buying high-quality coking coal. The two coking coal trade sources however, said they would wait for the new standards to be officially announced and implemented before they can assess the impact.
China's steel producers are selling some iron ore cargoes back into the market, cutting inventories to manage costs as slow demand for steel in the world's top consumer keeps profit margins under pressure.
Over the past two weeks, traders estimate that Chinese steel mills have resold 2 million to 3 million tonnes of cargoes bought under long-term contracts from miners into the spot market.
The sales have boosted available spot supplies, helping drive down prices to the lowest level for the year, and suggest Chinese mills may soon cut steel output as a slower-than-expected economic recovery dampens demand.
"It's very clear that they are potentially looking at some short-term production cuts which is why they are trying to reduce their incoming inventory," said a physical iron ore trader in Hong Kong who has seen mills offering cargoes due for delivery in June and onwards.
It is not unusual for steel mills to resell iron ore since many of them have units that engage in trading.
But reselling appears to have intensified of late as China copes with a softer steel market that has slashed iron ore prices by almost 13 percent this year and puts earnings of global miners such as Vale and Rio Tinto at risk.
"For the past two weeks we've been seeing mills offering cargo to the market on a daily basis," said the Hong Kong trader, who estimated the volume of resales by Chinese mills at around 3 million tonnes for the period.
Among the active sellers is Jiangsu Shagang Group, according to traders who have received offers of cargoes from China's largest privately owned steelmaker. Hunan Valin Iron and Steel, another major Chinese producer, has also offered cargoes for sale, they said.
Officials at Shagang and Valin were not immediately available for comment.
China Iron & Steel Association showed that China's average daily crude steel output hit a record high of 2.193 million tonnes in the first 10 days of May, up 3% from the preceding 10 day period, on Friday.
Chinese steelmakers have ramped up output to above 2 million tonnes per day since mid February in a move to maintain their market share amid slower than expected pickup in demand and declining margins. The average daily steel production was 2.129 million tonnes between April 21-30.
CISA estimated the country's total production based on its members, which comprise more than 70 large steel mills that account for about 80 percent of China's total steel output.
CISA members produced 1.748 million tonnes of crude steel on an average daily basis during the same period, up 2.7% from the preceding period.
China's crude steel output hit 65.65 million tonnes in April, down slightly from a record high a month ago, as steelmakers kept production robust to maintain market share.
Steel production is also likely to stay elevated in the coming months, analysts said, offering support to global iron ore and coking coal prices. China is also the No. 1 iron ore consumer with imports accounting for 60 percent of seaborne trade.
Despite weaker-than-expected sales, declining margins and high inventories, Chinese steel mills are not likely to make large production cuts in the near term, the analysts said.
"Firstly, they need to maintain their market share. Secondly, any big production cuts will affect their bank financing, their annual production target and revenue," said the analyst.
Steel production, still the second highest on record in April, edged down about a percent from 66.3 million tonnes in March, according to government data. Output was up 6.8 percent from a year ago.
Average daily production stood at 2.19 million tonnes in April, the second-highest level on record after February.
Total output for the first four months reached 258.2 million tonnes, up 8.4 percent from the same period last year.
The record output levels have boosted appetite for iron ore, with imports reaching 67.15 million tonnes in April, the third highest on record and up 4 percent from March.
Domestic iron ore production stood at 110.5 million tonnes, little changed from month ago.
Although margins have fallen, overall steel demand remains healthy enough to encourage mills to keep up production, said a senior official with a privately held steel mill in northern Hebei province, a major steel producing region.
A lacklustre rebound in steel demand have worsened the supply glut in China in recent weeks, dragging down rebar steel prices by about 17 percent from this year's high of 4,382 yuan ($710) a tonne, hit on Feb.4.
Steel product inventories with large Chinese steel mills are hovering at around 13 million tonnes since late March, after striking a record high of 14.5 million that month, the China Iron & Steel Association data showed.
China produced 2.116 million tonnes of crude steel per day over April 11-20, down by a slight 0.4 percent from the preceding ten days, data from the China Iron & Steel Association (CISA) showed on Friday.
Chinese steel mills have been producing in excess of 2 million tonnes of steel on a daily basis since mid-February, despite concerns about soaring stockpiles and weak demand.
CISA estimated the country's total production based on its members, which comprise more than 70 large steel mills that account for about 80 percent of China's total steel output.
CISA members produced 1.689 tonnes of crude steel on an average daily basis during the same period, down 0.5 percent from the preceding period, data showed.
China Iron & Steel Association (CISA) showed that China’s daily crude steel production of CISA membership steelmakers rose to 1.697 million tonnes in early April, an increase of 1.3% over late-March period. China national daily crude steel output was estimated to increase to 2.214 million tonnes.
China’s daily crude steel production of CISA membership steelmakers reached 1.6758 million tonnes in late-March, an increase of 0.49% over mid-March period. China national daily crude steel output was estimated to increase to 2.0719 million tonnes.
China Iron & Steel Association (CISA) estimated that China’s daily crude steel production of CISA membership steelmakers rose to 1.6758 million tonnes in late-March, an increase of 0.49% over mid-March period. China national daily crude steel output was estimated to increase to 2.0719 million tonnes.
In the meanwhile, crude steel output of non-membership steelmakers remained at 396,000 tonnes, a share of 19.1% of the overall volume.
Steel reinforcement-bar futures in Shanghai advanced for a fourth session, supported by higher raw material costs and as a seasonal increase in construction activity lifted demand for the building material.
The contract for October delivery rose as much as 0.7 percent to 3,861 yuan ($622) a metric ton on the Shanghai Futures Exchange, before trading at 3,845 yuan at 10:30 a.m. Futures have lost 3.6 percent this year.
Construction activity is gathering pace as temperatures rise across China, Zheng Ge, analyst at Wanda Futures Co., said by phone from Beijing today. Higher demand for the raw material used in construction may help reduce inventories, he said. Spot iron ore at Tianjin port gained 1.3 percent to $137.60 a dry ton yesterday, according to The Steel Index Ltd.
“There are some traders who want to buy at the moment to prepare for the onset of peak season” Zheng said. “There’s also some early sign of recovery in risk appetite from investors, which may benefit industrial commodities such as rebar in the short term.”
The average spot price of rebar increased 0.2 percent to 3,638 yuan a ton yesterday, according to Beijing Antaike Information Development Co.
Cia Siderurgica Nacional, Brazil's second-largest producer of flat steel products, expects sales to rise about 7 percent this year to 6.2 million tonnes, head of sales Luiz Fernando Martinez told analysts on a Monday conference call.
Profit at the steelmaker known as CSN beat analysts' estimates in the fourth quarter after revenue unexpectedly increased on improved domestic sales.
China's Baoshan Iron & Steel (Baosteel), the country's largest listed steelmaker, posted a 41 percent rise in 2012 net profit, helped by a one-off sale of some unprofitable assets, the firm said on Friday.
Net profit was 10.39 billion yuan ($1.67 billion), compared with 7.36 billion yuan a year earlier, the Shanghai-based company said in a filing to the Shanghai Stock Exchange.
Baosteel had said it expected its 2012 net profit to rise about 40 percent to 10.3 billion yuan.
Burdened with massive stockpiles of steel and slowing demand growth, some loss-making Chinese traders have asked mills for rebates on metal that has fallen in value since they bought it.
The requests, made in letters seen by Reuters, illustrate the strain of lower prices and slower growth on the steel supply chain in China, which produces half the world's steel. About 90 percent of mills in the country rely on traders to sell their products.
If the role of traders changes, mills could see their cashflow impacted. Traders pay mills in full ahead of their purchases, while at the same time offering credit to consumers such as property developers. As such, traders ease the cashflow-burden on both steel producers and users.
As Chinese demand growth has slowed along with a tepid economic recovery, traders have been stuck with record-high inventories that have drained their cash. Now, facing a loss on the value of those stockpiles, they want some money back from the mills.
"If traders leave the supply chain (because of steep losses), all pressure from sales, renting warehouses, stockpiling fees and capital costs will go to mills themselves," said Qiu Yuecheng, an analyst with Xiben New Line Co Ltd, a steel trading platform in Shanghai.
Steel traders in Hangzhou, one of the biggest steel trading centres in China, wrote to Jiangsu Shagang Group twice this month, requesting rebates for previous orders and lower prices for new bookings. They said they had incurred losses since February due to falling steel prices and weak sales, according to copies of the letters.
"Steel mills use every possible method to transfer their surging costs to end-users through traders. But the end-users refuse to accept the extra cost due to weaker demand, so it's the traders who end up incurring losses," Huang Yingjie, a veteran steel trader and deputy chairman of the Hangzhou Steel Traders Industry Association, told Reuters.
"The current purchase mechanism was formed because traders were able to push up prices when there was a supply shortage and this has been challenged now and a new booking pattern is needed."
Shagang, China's largest privately owned steelmaker, usually sets prices for long steel products like rebar and wire rod, used in construction.
Traders said the company had cut rebar prices by more than 300 yuan ($48) to 3,720 yuan per tonne and wire rod by 200 yuan to 3,800 yuan per tonne since mid-March in response to their requests.
Sales officials at Shagang could not immediately be reached for comment.
Most Chinese steel mills rely on traders to help distribute their steel products to manage costs mostly inflated by labour, lending and key raw material iron ore.
Traders from other regions, including the top steel trading city of Wuxi as well as western Chengdu, have also asked mills to drop prices and threatened to stop buying if their requests are not met, according to copies of letters they sent.
"We have cut our contract volume (with mills) by half this year as business is tougher than ever, while mills still ask us for full payment for bookings," said a Shanghai trader who buys from mills in the eastern Shandong province.
China's crackdown on lending last year shuttered thousands of steel trading firms who failed to repay loans as a slower economy dented steel appetite.
To cut their reliance on trading firms, some mills like Hebei Steel, China's largest steel producer, and smaller private Guofeng Iron & Steel have set up sales teams in big cities this year, Xiben New Line's Qiu said.
A few mills have started paying traders on a fixed commission basis, or only for a particular volume of products sold, while some are adjusting their pricing more frequently, traders said.
Beijing's renewed push to cool housing prices has also dented the outlook for steel consumption. The property sector uses about a third of China's steel products.
China's daily crude steel output hit a record 2.21 million tonnes in February as mills ramped up production in anticipation of demand that typically picks up from March onwards when construction activity resumes from the winter lull.
But slack demand lifted stockpiles of steel products held by traders to 22.51 million tonnes by March 15, while similar inventories at large Chinese mills stood at nearly 15 million tonnes as of March 20, both record highs.
"Steel mills are in a more difficult situation as they cannot stop running, but traders can quit if losses are big. The falling order books will not be a good thing for mills," said Huang from the Hangzhou steel trading group.
China Iron & Steel Association (CISA) estimated that China’s national daily crude steel output would reach 2.0637 million tonnes in mid-March, down by 1% from last ten days. CISA also said its membership steel mills’ daily output would total 1.6676 million tonnes in mid-March, down 0.47% from early March.
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The world's largest bulk shipper, China COSCO Holdings Co Ltd (1919.HK) (601919.SS), faces the risk of delisting for its Shanghai shares if it fails to turn around in 2013, after having warned of a second straight year of losses.
China COSCO, which posted a net loss of 10.4 billion yuan ($1.7 billion) for 2011, ranks as the world's sixth largest container ship operator, but has been battling the impact of a supply glut and weak demand that have becalmed the industry.
Other firms to run into turbulence are oil tanker operator Nanjing Tanker Corp (600087.SS), which could face share suspension, and China Shipping Container Lines Co Ltd (2628.HK) (601866.SS), which has narrowly escaped curbs on share trading.
State-controlled COSCO and the Chinese government are reviewing ways to restructure the company's business and help make it profitable again, analysts said.
"Asset sales seem to be a likely option for COSCO, but it also depends on the market condition and its management's strategy," said Geoffrey Chang, an analyst at BOCOM International.
Nathan Snyder, an analyst at CLSA, said, "We value its fleet at over $6 billion by marking the assets to secondhand prices, so selling and leasing back a portion would give enough gains to cover 2013 losses."
The company's stock fell sharply in Hong Kong on Monday after the shipping conglomerate said last week it expected to record a significant net loss for 2012 and faces the risk of the delisting of its A shares in Shanghai.
COSCO stock lost as much as 7.2 percent to reach HK$3.99 in mid-morning trade, although it recouped some of its losses to stand down 5.4 percent near the close of trade. It underperformed a slight rise in the broad Hang Seng .HSI.
China's securities rules provide for companies reporting two consecutive years of losses to be placed in a "special treatment" category that limits the daily trading movement of their shares to 5 percent, instead of the regular 10 percent.
A third straight year of losses for COSCO could result in a suspension of trading, with the risk of being delisted.
But China COSCO is not the only company in the shipping sector that faces the spectre of being delisted.
Oil tanker operator Nanjing Tanker Corp (600087.SS), whose shares have been placed under "special treatment", is likely to be the first Shanghai-listed shipping firm to face a share suspension, which would be followed by a possible delisting.
Owned by state-owned Sinotrans and CSC group, Nanjing Tanker is expected to post a net loss of 795 million yuan in 2012, based on a poll of six brokers by Thomson Reuters I/B/E/S.
Another shipper, China Shipping Container Lines Co Ltd (2628.HK) (601866.SS), was more fortunate. It escaped the "special treatment" category after saying this month that it expected to post a net profit for 2012, helped by sales of container boxes to its parent.
The global shipping market remains challenging in 2013 amid a lingering supply glut and weak demand, which have wounded China COSCO and other international shipping firms in the past two years, analysts said.
The Baltic Exchange's main sea freight index .BADI, which tracks rates for ships carrying dry commodities such as iron ore and coal, fell about 60 percent in 2012 to its lowest year-close since 1986.
The index has rebounded 14 percent so far this year, but the market outlook remains weak and volatile, analysts said.
CLSA forecasts China COSCO to post a net loss of 7.8 billion yuan in 2012 and a 2.4 billion yuan loss in 2013.
COSCO, controlled by state-owned China Ocean Shipping (Group) Company, operated 171 container vessels and 337 bulk cargo vessels at the end of September. About 220 of the bulk cargo vessels were owned by the company.
It also controls COSCO Pacific Ltd (1199.HK), a container lessor and port operator. ($1=6.2205 Chinese yuan)
China's annual consumer inflation eased to its slowest pace in nearly three years in October, official data showed on Friday, giving policy makers scope to further loosen monetary policy if needed to support growth in the world's second-biggest economy.
The consumer price index rose 1.7 percent from a year ago, slower than the 1.9 percent posted in September. Factory-gate prices in October fell 2.8 percent from a year earlier, a touch faster than the forecast fall of 2.7 percent but easing from September's 3.6 percent annual drop, which bodes well for a corporate sector struggling to cope with falling profits due to producer price deflation.
"The CPI I think came in a little bit lower than we expected and the market expected and further confirms that inflation is not a main concern for the government for now," said Zhang Zhiwei, Chief China Economist at Nomura in Hong Kong.
"So policy easing will likely continue for this quarter to support growth's recovery. We don't think they will cut interest rates for the rest of the year but we think they will probably keep the credit supply - the total social financing - at a high level for the coming months."
It was the lowest CPI reading since January 2010.
Data due at 0530 GMT is expected to point to a strengthening in October of China's recovery from its slowest period of growth since early 2009, and could cement investor expectations of a cyclical rebound.
Fixed asset investment and industrial production growth are the key numbers to watch, as they are barometers of both domestic activity and output from China's export-oriented factory sector. Retail sales data is also due.
If the read-outs offer more evidence supporting a rebound in the final three months of 2012, it could be a turning point for investors who have been bearish on China after seven successive quarters of slowing annual growth.
October likely saw a 9.4 percent year-on-year rise in industrial output, according to the consensus forecast from a Reuters poll.
That would be a small improvement on the 9.2 percent growth achieved in September which - along with a tick higher to 20.5 percent in year-to-date fixed asset investment growth - analysts see as flagging a potential turning point for China's economy.
The consensus view among economists is that a seven-quarter long cyclical downturn in China's growth ended in Q3, when it dipped to 7.4 percent year-on-year.
A tepid rebound to 7.7 percent is anticipated in Q4, with its mild nature restraining many investors from making aggressive turnaround bets, as evidenced by 10 of the 27 analysts polled by Reuters having forecasts below the median.
Beijing has been fine-tuning economic policy for a year to support growth, and analysts expect that programme to broadly remain in place after a new leadership of the ruling Communist Party is unveiled at a congress that began on Thursday.
Outgoing party chief, President Hu Jintao - almost certain to be succeeded by Vice President Xi Jinping - said in a speech to the congress that China would stick to policies fostering sustainable, long-term economic development with the aim of doubling GDP over the 10 years to 2020.
China has cut benchmark interest rates twice this year, lowered bank reserve ratios three times since late 2011 and made repeated, large-scale liquidity injections into the financial system to underpin slowing growth in the short-term.
Pan Pacific Copper, Japan's biggest copper smelter, sold 120,000 tonnes of copper to China under a 2013 term contract, about the same as in 2012, at a premium of $85 a tonne over the LME cash price, a source directly involved in the talks said.
The 2013 premium is 15 percent lower than in 2012 due to uncertainties over copper demand in China, the world's biggest consumer of the industrial metal.
Global resources giant BHP Billiton reported that copper output for the three months ended September 30 reached 273,900t, up 24% from the same period in the previous year, due to higher ore grades this quarter at its Escondida operation in Chile and the effects of a strike that impacted production in the year-ago quarter.
Output from Latin American operations grew by 32% to 235,700t, the company said in a statement.
The company's 57.5% share of output from Escondida amounted to 101,200t of copper in concentrate and 41,600t of cathode, representing increases of 103% and 26.4%, respectively. On a 100% basis, Escondida mined 103Mt of ore during the quarter, a 48.5% increase, with a 39.2% higher average head grade of 1.35% copper.
Escondida should see a 20% increase in copper output during fiscal 2013 after scheduled maintenance and tie-in activities were completed this quarter, according to the company.
Antamina in Peru contributed a record 40,200t of copper in concentrate in the 2012 quarter versus 30,300t in the year-ago quarter as milling rates continue exceeding nominal capacity, the company said. On a 100% basis, the mine registered throughput of 54.5Mt during the quarter, up from 44.2Mt, and an average copper head grade of 1.15% versus 1.11% year-on-year.
Antamina also contributed 14,514t zinc, up 62%, 919,000oz silver (-5.45%), 260t lead (155%) and 454t molybdenum (-23.7%). BHP Billiton holds a 33.8% stake in the mine.
The Spence and Cerro Colorado mines in Chile together produced 17,800t of copper cathode in fiscal Q1, a year-on-year decrease from 22,500t. The company also produces copper at the Olympic Dam mine in Australia and Pinto Valley in the US.
After four straight months of declines, consumer price inflation has finally edged up in China.
Chinese consumers paid 2% more in August than they did a year ago, the government's National Bureau of Statistics reported Sunday. That's up from a 1.8% increase in July -- a two-and-a-half year low.
China's annual inflation rate rose 2.0% in August, the government's National Bureau of Statistics reported Sunday, up from 1.8% in July -- a two-and-a-half year low.
Food prices, which account for more than a third of the inflation calculation, rose 3.4% during the month.
Household finances in China are especially susceptible to fluctuations in food prices, as many poor families spend large percentages of their income on food.
Still, inflation remains at very low levels. As recently as one year ago, China's consumer price index stood above 6% -- well north of the government's stated inflation rate target of 4%.
The very low rate should allow the government more flexibility in pursuing economic stimulus.
In July, officials said that annual economic growth dropped to 7.6% in the second quarter -- down from 8.1% the previous quarter.
The People's Bank of China twice lowered interest rates, and the central bank has also tried to spur growth by cutting the amount of money banks are required to hold in reserves.
But those measure seem to have fallen flat. Some analysts have recently lowered their growth forecasts for the rest of the year, while some noted that weakness is likely to extend into 2013.
On Friday, the government confirmed more action, this time in the form of a $157.7 billion investment in 55 new infrastructure products. Analysts said the move should help boost growth in the fourth quarter.
Zhiwei Zhang, and economist at Nomura, said in a research note that the projects -- which include 25 new subway lines -- are a sign that the government's policy stance "has become significantly more proactive."
China's official factory purchasing managers' index fell to a lower-than-expected 49.2 in August from 50.1 in July, official data showed on Saturday, in a result that is likely to strengthen the case for further policy steps to bolster growth.
The official PMI dipped below 50, which demarcates expansion from contraction, for the first time since November 2011, in the latest sign that the world's second-biggest economy is struggling against global headwinds.
Economists polled by Reuters this week had expected the August official PMI to slip to 50.
China cut interest rates in June and July and has been injecting cash into money markets to ease credit conditions to support the economy that notched a sixth straight quarter of slower growth in the April-June period.
But analysts are divided over whether that will be enough to stop the slowdown extending to a seventh quarter.
The PMI's output sub-index eased to 50.9 in August from July's 51.8, the National Bureau of Statistics said.
A flash PMI published last week by HSBC plunged to a nine-month low of 47.8 in August, as new export orders slumped and inventories rose, a signal that a persistent slowdown in economic growth has extended deeper into the third quarter.
According to the latest Reuters poll, China's annual economic growth could pick up to 7.9 percent in the third quarter from a three-year low of 7.6 percent in the second quarter in response to government policy fine-tuning.
A raft of weaker-than-expected July data had cooled market expectations for any quick economic recovery, especially as the central bank sticks to its "prudent" policy stance for fear of reigniting property and inflation risks.
Still, analysts believe the central bank will continue to loosen policy further by cutting interest rates and banks' reserve requirement ratio in coming months to support growth.
The HSBC PMI has been below 50 for 10 straight months, reinforcing calls from analysts and investors for further measures from Beijing to support economic growth.
The official PMI generally paints a rosier picture of the factory sector than the HSBC PMI as the official survey focuses on big, state-owned firms, while the HSBC PMI targets smaller, private firms that have limited access to bank loans.
There are also differing approaches to seasonal adjustment in the surveys.
The final HSBC reading will be published on September 3, as will the National Bureau of Statistics' services PMI.
Marc Faber, the Swiss investor and ultra bear, says there have been four mega bubbles in the past 40 years. In the 1970s it was gold; in the 1980s it was the Nikkei, and in the 1990s it was the Nasdaq. Bigger than all of them, though, has been the iron ore bubble, a tenfold increase in prices in less than a decade.
Iron ore is the raw material for steel, production of which has rocketed as a result of China's economic boom. Consider the following facts. In the past 15 years, China has built 90 million new homes – enough to house the populations of the UK, France and Germany combined. A quarter of global steel demand is for Chinese property and Chinese infrastructure.
Commodity-rich countries, like Australia, have never had it so good. China takes 25% of Australia's exports and iron ore accounts for 60% of all the goods Australia sells to China. One reason Australia avoided recession during the global downturn of 2008-09 was that it had a well-run banking system. A much bigger reason was that the country had become a giant pit from which China could extract the minerals it needed for its industrial expansion. Money flooded into the country from sovereign wealth funds and hedge funds looking for AAA investments. The Australian dollar has soared, as have property prices.
China's economy is now slowing, and although the economic data is not particularly reliable, it seems to be slowing fast. The country has two million unsold homes, with another 30 million under construction. There is a glut of iron ore and the price is falling. Where does that leave Australia?
Horribly exposed, quite obviously. It has an over-valued currency, an over-valued property market, and its major customer is now desperately pulling every available policy lever in the hope of avoiding a hard landing. Whatever happens, the Australian dollar is a sell. Just how big a sell will depend on how successful Beijing is in reflating the Chinese economy.
China's consumer inflation eased to its lowest rate in two and a half years in July, giving the government more leeway to loosen credit to spur the slowing economy.
The Consumer Price Index (CPI), a key gauge of inflation, grew to 1.8 percent year on year in July, the slowest rate since February 2010, the National Bureau of Statistics (NBS) announced Thursday.
The rate was 0.4 percentage points lower than the figure for June.
The Producer Price Index (PPI), a main gauge of inflation at the wholesale level, fell 2.9 percent in July from a year earlier.
The easing inflation is believed to be a result of the base effect. The CPI growth rate hit a 37-month high of 6.5 percent in July last year before gradually retreating as China's economy slowed for eight quarters in a row.
China's official factory purchasing managers' index (PMI) fell to an eight-month low of 50.1 in July, suggesting the sector is barely growing, while a rival HSBC survey indicated the more market-sensitive private sector is starting to recover.
The HSBC PMI rose to a seasonally adjusted 49.3, its highest level since February and little changed from a flash, or preliminary, estimate of 49.5.
With both PMI readings around 50 -- a threshold dividing expansion from contraction -- the surveys signal that the private and state-backed parts of China's vast factory sector are stabilising - albeit at a relatively low level of growth.
"It is clear that the manufacturing sector is doing very poorly, and requires policy support," Dariusz Kowalczyk, senior economist at Credit Agricole-CIB in Hong Kong said.
"However, we want to highlight the fact that such levels of sentiment are still consistent with positive growth of industrial output," he wrote in a note to clients.
Indeed, both the official PMI and the HSBC version showed factory output at 50 or above. Government data showed industrial output in June rose 9.5 per cent from a year earlier.