Steel Products Prices North America

Chinese Iron Ore Bubble Popping…
Written by John Packard
March 7, 2014
Steel Market Update has been writing about the iron ore pricing and inventory bubble growing in China. We have been forecasting that it is only a matter of time before the bubble will burst and iron ore prices will collapse. The issues are a slowing Chinese steel sector, pollution issues plaguing the Chinese government, bank loans to Chinese steel mills and iron ore traders going unpaid and non-banking sectors providing steel companies and traders’ loans using iron ore as collateral.
As of Friday, March 7, 2014, the Chinese ports held 103.85 million metric tons of iron ore.
SMU received the following email from our Asian iron ore trader who has been warning us about the situation in China over the past couple of months.
“The Banks announced this afternoon they are going to intervene on Iron Ore at the Ports now. Buyers/Mills are requesting extensions on the payments and since the Buyer’s have to provide 20-30% Deposit when Opening the LC and against Negotiation of the Documents, the Banks are now advising they will Confiscate the 20-30% and auction the Iron Ore at the ports to recover the 70-80% as they are refusing any extensions.
The s__t is about to hit the fan.
With this announcement today, the domestic market tumbled and dropped by USD3/mt and Platts just came out down USD3/mt as well! 62% is now standing at USD112/mt CNF FO. We will be close to USD110/mt level we discussed a few weeks back very, very soon.”
Steel Market Update went back to our source and asked if steel export prices are being impacted and how many steel mills and iron ore traders are affected. This is what we received back:
“Can only answer the ones I know…
Steel Export prices are already on the move downwards. I will update you on Monday of new levels.
As for raising capital by dumping off some of the steel already produced, a lot of that steel has already been used as collateral for loans John. Also in China, when Mills or Traders receive an LC, they can discount that LC with the Banks at 3% or 5% and take the cash money in advance of even production or export. If something should happen and the goods are not shipped, then the LC receiver has to refund the cash.
How many companies are going to be affected and does anyone have any guess, not yet John as the announcement only came today, but from what we have heard, many Traders will be hit the hardest. Steel Mills started unloading their “on water” cargos a few weeks ago, meaning reversing the chain of Buyer – End User to Buyer – Seller.
With over half the tonnages at the ports at high prices John, and the market taking 10-12% decreases
recently, and no upswing in sight, it was inevitable that the Banks make a stand to cover their own
asses as they know they are not going to get paid.”
SMU believes $110 62% Fe fines is inevitable. The question is will ore dive below $100/dmt and how big will the losses be at the larger mills who are stuck with ore at $120+?

John Packard
Read more from John PackardLatest in Steel Products Prices North America

Thin demand keeps plate prices hovering at lowest levels since February
Participants in the domestic plate market say spot prices appear to have hit the floor, and they continue to linger there. They say demand for steel remains thin, with plate products no exception.

SMU Price Ranges: HR crawls back to $800/ton
SMU’s HR price stands at $800/st on average, up $5/st from last week. The modest gain came as the low end of our range firmed, and despite the high end of our range declining slightly.

SMU successfully completes IOSCO review
SMU has successfully completed an external review of all our prices. The review has concluded that they algin with principles set by the International Organization of Securities Commissions (IOSCO).

Domestic plate prices could heat up despite so-so demand, market sources say
Some sources also speculated that plate could see further price increases thanks to modest but steady demand, lower imports, mill maintenance outages, and end markets less immediately affected by tariff-related disruptions.

SMU Price Ranges: HR holds, galv slips amid competing market narratives
SMU’s sheet and plate prices see-sawed this week as hot-rolled (HR) coil prices held their ground while prices for galvanized product slipped.