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It is reported that iron ore, the basic steelmaking ingredient, has seen its price soaring over 5 times in the past six years due to strong demand from emerging economies and ore giants' dominant role in annual ore talks and the price surge at the year start has eroded profits of Hebei steel mills by CNY 15 billion.
However, most analysts expect that the situation will change and the iron ore price talks for fiscal 2009 are likely to turn the tables against producers for the first time in several years, and major consuming countries, including China, will have a bigger say in what is expected to be a buyers' market dominated by high inventories and falling demand.
The forecast is based on the basic market fundamentals' shift, steel mills across the global have performed massive production cut resulted from diving steel prices, dragging down demand for iron ore and leading to oversupply. As a result, the spot ore price has fallen below contract ore for the first time in seven years.
Statistics show that quayside inventories and steel mills' stockpiles for imported iron ore have added up to over 80m tons in Oct, recording the highest level ever. And Brazilian ore giant Vale has also abandoned its additional 12% price advance request for Chinese mills, indicating that global ore giants have felt the market decline.
Global ore price fall is set to benefit steel mills in China, relieving their costs pressure and pulling them back from the verge of profit deficit. Figures show that 45% iron ore consumed by Hebei mills are from imports, and the province is expected to buy 80 million tonnes of the metal this year.
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