Steel Cos Unable to Cash in on Low Raw Material Costs
BENDING UNDER PRESSURE Spot iron prices have touched historic lows of $30 a tonne, forcing national miners like NMDC to cut prices by 25%
Iron ore prices have slumped to $30 a tonne in the spot market, a decade's low, hurt by poor demand from steel companies and increased supplies from global miners.
NMDC, the biggest domestic miner, announced a 25% reduction in prices over November, the steepest-ever month-on month price cut by the state-run company. However, local steel firms, which are experiencing some of the lowest raw material prices ever, seem unable to take advantage of lower input costs since steel prices also remain weak in the face of high imports.
Benchmark iron ore for immediate delivery at Tianjin port in China was trading at a decade low of $38.30 a tonne, down 1.3% from its prior close. With commodity markets on a downswing, the outlook for iron ore is weak and analysts predict prices to plunge to the $20s in 2017. Even the news of a 22% rise in Chinese iron ore imports in November and improved inflation numbers in the world's largest consumer failed to stem the tide of losses.
The slump has been attributed to a supply glut from big miners like BHP Billiton, Rio Tinto and Vale, even as an unexpected slowdown in China hit the industry. NMDC, which supplies ore to nearly 40% of steelmakers in India, has seen prices of high-grade lump ore falling to less than half at `1,800 a tonne for the current month, compared to Rs 4,200 in January.
Not More Steel, But More Steel For Your Buck
It may take a while before the commodity cycle turns, given the lacklustre prospects for growth globally. The way ahead is for iron ore miners to seek value via beneficiation, benefaction and related productivity gains, including logistical improvement in evacuation. Downstream steelmakers need to shore up value-addition in products and customise output. Producers need to sit down with customers to think through new steels, with innovative specifications.
Iron ore prices have slumped to $30 a tonne in the spot market, a decade's low, hurt by poor demand from steel companies and increased supplies from global miners.
NMDC, the biggest domestic miner, announced a 25% reduction in prices over November, the steepest-ever month-on month price cut by the state-run company. However, local steel firms, which are experiencing some of the lowest raw material prices ever, seem unable to take advantage of lower input costs since steel prices also remain weak in the face of high imports.
Benchmark iron ore for immediate delivery at Tianjin port in China was trading at a decade low of $38.30 a tonne, down 1.3% from its prior close. With commodity markets on a downswing, the outlook for iron ore is weak and analysts predict prices to plunge to the $20s in 2017. Even the news of a 22% rise in Chinese iron ore imports in November and improved inflation numbers in the world's largest consumer failed to stem the tide of losses.
The slump has been attributed to a supply glut from big miners like BHP Billiton, Rio Tinto and Vale, even as an unexpected slowdown in China hit the industry. NMDC, which supplies ore to nearly 40% of steelmakers in India, has seen prices of high-grade lump ore falling to less than half at `1,800 a tonne for the current month, compared to Rs 4,200 in January.
Not More Steel, But More Steel For Your Buck
It may take a while before the commodity cycle turns, given the lacklustre prospects for growth globally. The way ahead is for iron ore miners to seek value via beneficiation, benefaction and related productivity gains, including logistical improvement in evacuation. Downstream steelmakers need to shore up value-addition in products and customise output. Producers need to sit down with customers to think through new steels, with innovative specifications.
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