Big news hit the headlines this week with the announcement of the mega merger between Chinese steelmakers WISCO and Baosteel. Once merged, the two firms will become the second largest steel company in the world, causing some to fear that there will be a negative impact on iron ore demand due to a reduction in producers. But industry experts seek to assuage those concerns, pointing out that the last producers still left standing, following mergers and acquisitions, tend to be more strategically located along the coast, with easy access to global iron ore imports, which are of better quality and lower prices than domestic product. For example, high-quality Tangshan 66% ore, produced domestically, is selling for $81/ton, whereas 62% imported ore, though slightly lower in quality, is selling for $53/ton. This is an important fact for Chinese steel makers, who need to make the best use of all their operating cash. Continue reading
Probably the most closely watched economy in the world is the US market, where retail sales (excluding automobiles) continued to gain strength, picking up another .4 percentage point after a .1% gain the previous month. However, uncertainties over debt-ceiling negotiations caused a slump in the consumer confidence index, falling to 71.2 in October from 80.2 in September.
The Chinese economy continues to be a primary factor in the performance of iron ore, coal and other raw materials. A slow-down in China’s steel markets has created a surplus of iron ore inventories at China’s major ports. Steel PMI in October was down 1.7 points from September’s index, to 47.5, below the 50 point threshold, confirming a weakening steel industry. Continue reading