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Steel demand plunges as construction cools down


Post Date: 04 Aug 2010    Viewed: 471

Steel demand for the last six months in China, the world's largest metal consumer, has declined rapidly as fix asset investment has fallen dramatically, the China Iron & Steel Association (CISA) said Tuesday.


"Crude steel consumption went from growing at 27.41 percent in January to contraction of 1.14 percent in June," Luo Bingsheng, vice chairman of the China Iron & Steel Association, told reporters in Beijing Tuesday.


According to Reuters, CISA said output from China's major steel producers fell by 3 percent to 1.34 million tons in the middle 10 days of July, the second straight fall in the month.


The latest output rate translates into 602 million tons on an annualized basis.


In November 2008, a 4 trillion yuan ($590.47 billion) stimulus package was rolled out in order to boost the economy amid the global financial crisis, greatly bolstering the country's steel demand.


In April, the central government started to take strong measures to restrain housing prices and property speculation, but a side effect of the drop off in construction was dampened demand for steel.


With uncertain future demand, higher costs and dropping prices, around 40 percent of small- and medium-sized mills have had no choice but to cut output, Luo said.


Meanwhile China is trying to wean itself off its addiction to iron ore sold by La Vale, BHP Billiton and Rio Tinto, the three miners which account for three-quarters of global trade.


The oligopoly dropped a four-decade system of setting annual prices and raised rates twice this year.


Iron ore imports dropped 9 percent to 47.2 million metric tons in June from May, falling from a record 628 million tons last year.


Around 98 percent of the world's mined iron ore is used to make steel.


As the world's largest buyer of iron ore, China's average iron ore price, which includes cost, insurance and freight, was about $112 per ton in the first half of 2010. That is a rise of about 47 percent from a year earlier.


The iron ore price was even as high as $140 per ton in June, more than doubling over the same period last year.


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