Iron Ore Prices

[BlueKelah]

Rank Country Iron ore production
(thousands of tonnes) year
World 2,950,000 2013
1 China People's Republic of China 1,320,000[1] 2013
2 Australia Australia 530,000 2013
3 Brazil Brazil 398,000 2013
4 India India 150,000 2013
5 Russia Russia 102,000 2013
6 Ukraine Ukraine 80,000 2013
7 South Africa South Africa 67,000 2013
8 United States United States 52,000 2013
9 Canada Canada 40,000 2013
10 Iran Iran 37,000 2013

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From this recent list it goes to show which continents probably have the most recoverable iron ore deposits and hence the oligopoly that exists.

China looks like the largest producer and should have cheaper labour costs than Australia but the ore quality(% of iron in deposits) in Hamersley Province in the Pilbara district of Western Australia is really high and easily mined via open-cut mining (mine looks like a big crater). So I would assume that Chinese iron ore, which at some mines reportedly costs like ~$90USD to produce, probably has like half the quality or is deep underground and difficult to reach/mine.

Brazilian iron ore from Carajás Mine, the world's largest iron ore mine, is located in the state of Para in Northern Brazil, is probably of pretty high quality too and coupled with their cheap labour costs competes well in the global market. [The Carajas region boasts the richest reserves and concentrations of iron ore anywhere in the world and was discovered entirely by accident in the late 60s when a US Steel Helicopter was forced to land on a hill in the area to refuel. Surveyors on board noted the baron state of the hill and subsequently discovered that the iron content was as high as 66%. Other mineral deposits were discovered later; Carajás is rich not only in iron ore but also ores for manganese, copper, tin, aluminium and even gold.] I do wonder how the valuation of Vale stacks up against that of Rio or BHP, might be a good company to invest in for the long term as well.

As such, any continent with easily mined and large deposits of high quality should give rise to mining superpowers. So not surprisingly we have 2 top producers form AUS and 1 Brazilian forming some sort of oligopoly.

I do wonder why large continent like USA/Canada produces so little, surely there must be lots of good quality iron deposits in the deserts over there. Maybe US Fed is just keeping them there for future use and mining only enough for local use.

[greengiraffe]

China faces more wobbles
Iron ore

581 words
30 Aug 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

Shanghai The Chinese property ­market is showing further signs of strain as developers hastily sell off assets to compensate for slumping apartment sales, undermining ­sentiment for iron ore which hit a fresh two-year low on Friday.

The price of iron ore, which is the key commodity in steel-making, touched $87.30 a tonne, taking its losses to 38 per cent this year.

The weak Chinese property market is the main factor behind the slumping price as demand for steel has slowed at a time when the big global miners are ramping up their supplies of iron ore.

Tim Murray, the managing partner at J Capital Research, believes the iron ore price is likely to bounce marginally from current levels.

"I have said for some time now that the price is likely to trade in a range between $US95 ($101.60) a tonne and $US85 a tonne," he said.

"August is traditionally a down-time for the iron ore price as construction [in China] slows down due to the hot weather and people taking holidays," Mr Murray said.Not a 'roaring rally'

"It won't be a roaring rally but we should see prices move a bit higher."

China buys around two-thirds of the iron ore sold globally and its property sector consumers 30 per cent of this.

In the last three months the property sector in China has wobbled badly, as an ­oversupply of apartments and tighter credit led to buyers staying out of the market.

In July new home prices fell in 91 per cent of cities surveyed by the National Bureau of Statistics, the worst ­performance on record.

This was coupled with residential property sales falling 17.9 per cent from a year earlier, while the amount of unsold properties held by developers rose 25 per cent over the last 12 months.

To compensate for these slumping sales in China, some of the country's developers have begun selling off blue chip properties to strengthen their financial position.

Hong Kong listed developer Shui On Land sold two hotels in Shanghai ­during the week, raising ­­$­US439 million. The sales came after the company reported a 24 per cent slump in ­first-half profits as sales fell 54 per cent from the same time last year.Asset sales likely

Shui On Land said more asset sales were likely.

China's biggest developer Vanke is also reportedly close to finalising the sale of its shopping mall assets.

Reuters has reported that private equity firmCarlyle could pay as much as $1.7 billion for nine malls owned by Vanke across the country.

Vanke said the amount of floor space it sold in the first half rose a solid 14 per cent, but it still looks to be shoring up its balance sheet through asset sales.

This suggests a difficult year ahead for the Chinese property market, as ­sentiment continues to deteriorate.

"We expect the correction in the property market – the most likely ­trigger for any crisis – to grind on over coming quarters rather than to come to a sudden head," said Mark Williams, chief Asia economist at Capital ­Economics in London.

UBS China economist Wang Tao said any immediate pick up in the ­property market was unlikely.

She estimated that over the last ­decade China has built 48 million more apartments than demand required.

Many of those new apartments had been bought by speculators and had been kept empty and unrented.


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[greengiraffe]

Local miners to feel pain as iron ore price bottoms
THE AUSTRALIAN SEPTEMBER 01, 2014 12:00AM

Paul Garvey

Resources Reporter
Perth
IRON ore prices have officially fallen to their lowest since the global financial crisis, spelling more pain for Australian miner s.

The benchmark price at the Chinese port of Qingdao fell last Friday to $US87.62 a tonne, lower than the depths reached during the plunge of September 2012 and the lowest it has traded since October 2009.

The price has now fallen almost 35 per cent this year, reflecting the influx of new production from Australian producers and a slowdown in economic growth out of China, the world’s biggest consumer of iron ore.

While the falling price has hurt the margins of Australian iron ore producers, the impact has been softened somewhat by a weakening in the Australian dollar. The Qingdao price translates to $93.80 a tonne, still above equivalent lows from 2012.

The price slide and concerns about the outlook has seen short positions in Australian iron ore miners rise substantially.

According to Bloomberg data, the total short positions in Fortescue Metals Group, Atlas Iron, Mineral Resources and BC Iron have touched all-time highs in recent weeks. The total short interests in Fortescue even exceed levels from September 2012, when the company’s swollen debt position and the plummeting prices sparked short-lived concerns about the company’s survival.

Fortescue is in a much stronger financial position, having paid down more than $US3 billion in debt in the past 12 months while increasing output and reducing production costs significantly.

Another key benchmark, the Tianjin index, was up slightly on Friday from $US87.30 to $US87.90 a tonne. The recently completed capacity expansions of heavyweights Rio Tinto, BHP Billiton and Fortescue has seen a flood of ore coming to market. Year-to-date exports out of Australia are up about 27 per cent after increasing 18 per cent in 2013.

ANZ Research head of commodities Mark Pervan said in a note last week that Chinese domestic iron ore supply had been “stubbornly high” this year, contributing to a major headwind for prices.

Mr Pervan argued that Chinese producers appeared to have lowered their production costs this year while other unprofitable operations were being kept open as they were owned by steel mills that needed to generate at full capacity.

[greengiraffe]

Iron ore price touches fresh two-year low
DANIEL PALMER BUSINESS SPECTATOR SEPTEMBER 02, 2014 9:20AM

ONE of the longest losing streaks for the price of iron ore may have come to an end on Friday last week, but the recent rout does not appear over yet.

Overnight, the commodity fell once again, with the move representing the ninth red day in the last 10.

As a result benchmark iron ore for immediate delivery to the port of Tianjin in China is currently trading at $US87.10 a tonne, down almost one per cent from its $US87.90 closing mark in the previous session and below the year’s previous low point of $US87.30, reached on Thursday last week.

The latest fall sees iron ore mark a fresh two-year trough and pushes it ever closer to its post-crisis low. The benchmark price is now just US40c above a low reached on September 5, 2012 and if it dips under $US86.70 it will be at its lowest ebb since October, 2009.

Falls overnight were driven largely by concerns around the Chinese economy, with manufacturing data yesterday failing to flatter. Such news is unwelcome for investors in the commodity as it further raises fears of soft demand at a time when iron ore heavyweights Rio Tinto, BHP Billiton, Fortescue Metals Group and Vale are raising supply.

The latest fall did not have much impact on the UK-listed shares of BHP and Rio Tinto, however, with stock in both companies largely flat overnight

[specuvestor]

I do wonder why large continent like USA/Canada produces so little, surely there must be lots of good quality iron deposits in the deserts over there. Maybe US Fed is just keeping them there for future use and mining only enough for local use.

Steel is a major industry for industrialisation. US Steel was a major Dow component in the early part of last century, and first company to pass US$1b market cap. We also got our Natsteel even when we don't produce anything

But post industrialisation it is no longer a focus. Vale, Rio and BHP are exporters by business, rather than local consumption per se. They have been riding on China's coat-tails but if China moving into post-industrialisation there will be significant impact on their iron ore growth potential. They probably need to wait for India next.

[greengiraffe]

Iron ore slide to $US75 will hit Australian suppliers: analyst
THE AUSTRALIAN SEPTEMBER 03, 2014 12:00AM

Paul Garvey

Resources Reporter
Perth
IRON ore prices will fall to as low as $US75 a tonne next year and begin knocking out Australian sources of supply, a leading commodities analyst has warned.

Ian Roper, a former analyst with Rio Tinto who now works out of Shanghai for CLSA, has made further cuts to his iron ore price outlook in response to a stronger than expected ramp-up in supply by Australia’s iron ore miners.

Mr Roper now expects the iron ore price to fall to $US75 a tonne by September 2015, compared to his previous forecast for prices to drop to $US80.

The benchmark iron ore price has already fallen by more than 37 per cent this year to around $US87.10 a tonne.

While smaller iron ore miners are hoping that high-cost Chinese iron ore production will put a floor under the price and stop the price slide, Mr Roper argued that prices would continue to fall and flagged closures would spread to international iron ore suppliers including Australia.

He said iron ore was likely to follow a similar path to the coal price, which has been hovering at lows for two years as marginal mines battle to stay in production.

Mr Roper also argued Chinese steel mills would be reluctant to shut their own iron ore production capacity.

“After already losing capital in mine investments, would Chinese steel mills be willing to cut their losses and become dependent entirely on seaborne supply from the major low-cost mines?” he asked.

“Surely it is more likely that they will retain bitter memories of the pain they have suffered at the hands of the iron ore oligopoly and be willing to support their own captive supply even at a loss.”

The analysis found that about 25 million tonnes of Australian supply would be at risk if iron ore fell to $US70 a tonne, although the impact in Australia was less significant compared to other higher cost producers.

Mr Roper’s prognosis came as Gina Rinehart flagged a possible early start to mining at her $10 billion Roy Hill mine.

“Roy Hill’s staff morale is high, and the hardworking team hope to be able to bring the first shipment due September 2015, ahead of time,” Mrs Rinehart said.

[greengiraffe]

Chinese got power, don't think they are suckers... more often than not, non Chinese are suckers...

Chinese agency calls iron ore pricing system into question
Lisa Murray
656 words
3 Sep 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Shanghai China's powerful economic planning agency has called on Australia's big iron ore producers to come up with a better pricing system for the commodity, following a meeting with BHP Billiton's local chief.

The National Development Reform Commission said that BHP and the other main iron ore suppliers "should not abuse their dominant market position", according to a statement on the agency's website.

BHP's country president, Chai Tan, met with the deputy director of the Department of Industry, Li Zhongjuan, to brief the NDRC on the company's results and demerger announcements.

At the briefing Ms Li said the current pricing system lacked transparency and was based on "small sample sizes", according to the NDRC statement. "Efforts need to be made to pursue a new pricing model," she said.

BHP responded by insisting it already actively worked with its ­customers and stakeholders to develop "a liquid and transparent market for iron ore".

"It is clear from recent iron ore price movements that prices are responding quickly to changes in the supply and demand balance and that the ­market is transparent and functioning well," a BHP spokeswoman said in an emailed statement.

Qiu Yuecheng, an analyst at steel products trading platform XiBen New Line, said "the NDRC made these comments to show that it is safeguarding the interests of Chinese steel mills".

However, the timing of the NDRC's comments has surprised many in the industry as iron ore prices are hovering near five-year lows.

While suppliers may have had the advantage in years past, a ramp-up in production and a faltering Chinese property market has pushed iron ore prices down 35 per cent so far this year.A shift in the balance of power

"China is definitely winning," said Melinda Moore, a bulk commodities analyst at Standard Bank in London.

There are "massive iron ore over supplies" and "most steel mills are now profitable due to deep falls in input prices".

"The market has many local and foreign suppliers and many local and foreign buyers, demonstrating the depth of liquidity," Ms Moore said. "Prices are being negotiated between these willing buyers and willing sellers on a daily basis, using a range of market-driven mechanisms to assist. There are now local and international physical platforms; there are local and international market index providers estimating daily prices. What more do they want?"

The Chinese government has a long history of sparring with iron ore suppliers over pricing.

Up until 2010 prices were set annually following tense negotiations. But after BHP began pushing for market-based pricing in 2008, the industry shifted to shorter-term contracts.

The NDRC's statement regarding iron ore pricing comes as China has been accused of targeting foreign firms in a series of high-profile anti-trust investigations, which include probes of the big global car firms, Microsoft and Qualcomm.

BHP is progressing with a plan to spin off a $15 billion entity that will ­contain a number of the company's "second-tier assets" spanning aluminium, manganese, the Cannington silver mine and part of the coal business.

The new demerged company is tipped to yield up to $US3.5 billion ($3.7 billion) of annual productivity gains by the end of the 2016-17 financial year.

BHP plans to boost its iron ore output to 290 million tonnes a year from 270 million tonnes at an even cheaper cost of $US40 a tonne.

Rio Tinto's "break-even" cost for iron ore sits at $US43 a tonne, while BHP's is $US45 and Fortescue's is $US72 a tonne.

Brazilian producer Vale's costs are higher again at about $US76 because it has further to ship to China.

Global supplies of iron ore are tipped to exceed demand by 175 million tonnes next year as exports from Australia and Brazil increase.


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[greengiraffe]

Iron ore price hits five-year low
DANIEL PALMER SEPTEMBER 04, 2014 7:00AM

After flirting with a five-year trough for the past week, the iron ore price has finally reached the unwelcome milestone overnight.

Continued concerns over a supply-demand imbalance led to fresh falls, with the latest retreat representing the 11th red session in the past 12.

Benchmark iron ore for immediate delivery to the port of Tianjin in China is currently trading at $US85.70 a tonne, down over one per cent from its $US86.70 closing mark in the previous session.

The commodity has lost over 35 per cent this year, with its most recent slump seeing its price hit its lowest level since October, 2009. It has lost 8 per cent of its value during the past fortnight alone as Rio Tinto, BHP Billiton and Vale lift supply at a time when fears grow of a softening Chinese economy.

The latest drop came after a widely-quoted research note this week from respected CLSA analyst Ian Roper, who forecast a $US75 a tonne price in the back half of next year.

Investors were also struck by comments from the head of mining giant Anglo American, Mark Cutifani, who warned the retreat could have further to run.

"There is a lot of [iron ore] supply coming on and it will impact profits -- and so I'm concerned," he said this week.

While there are hopes that the price drop will reduce supply from marginal producers, particularly in China, Mr Cutifani cautioned this could take a while to impact the market.

"What I've found in this industry is that a lot of capacity can be really sticky," he said.

"My concern is the downside [to prices will be] more and longer than you anticipate."

The share prices of BHP Billiton and Rio Tinto were mixed on the news overnight, with BHP yielding 1.5 per cent in a rising market, while Rio added 0.5 per cent. However, BHP's losses can largely be put down to going ex-dividend.

Rio and BHP both have market-leading cost structures that leave them turning a profit until prices sink below $US50 a tonne.

Such good fortune is not shared by the rest of the local industry as Atlas Iron has a breakeven price in the low $US80 range, while Fortescue Metals Group and BC Iron have breakevens of around $US70 a tonne, according to a recent UBS analysis.

[greengiraffe]

Iron ore has further to fall, warn analysts
Big picture Karen Maley
901 words
6 Sep 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Iron ore prices may be plumbing fresh five-year lows, but analysts warn they could fall even further in coming months.

Share prices of Australia's iron ore companies have been hit sharply in recent weeks as the benchmark price for iron ore has tumbled to just over $US84 a tonne.

Even giant mining companies that are better insulated from the iron ore price drop – because they have lower production costs as well as access to higher-quality grades of iron ore that they sell at a premium – have seen their share prices fall.

BHP Billiton, which was trading close to $40 when it released its results just over a fortnight ago, has seen its share price drop to below $36.

In a research note released in the wake of the BHP results, Deutsche Bank analysts highlighted the company's success in cutting costs in its iron ore, copper and coal divisions.

"The $US5.5 billion [$5.9 billion] cost-out target was exceeded by $US1.1 billion, and another $US3.5 billion in cost reductions is being targeted by the 2017 financial year," the note said.

"Unit costs in iron ore dropped from $US29.3 per tonne to $US25.8 per tonne and we expect these to drop to $US24 per tonne over the next few years."More pain ahead

But even though the benchmark price for iron ore has already tumbled more than 35 per cent this year, UBS analyst Daniel Morgan warns there could be further pain in the next two months. In a research note released this week Morgan points out that China's crude steel production typically falls by around 10 per cent in the September-November period each year, following the summer peak in steel demand.

This has an impact on the iron ore market. Since 2010, iron ore prices have risen an average 8 per cent between November and April, but declined by an average 17 per cent from May to October.

Morgan says: "Prices tend to be supported through the January-April period as steel production rates lift; fall in May as production peaks; [there is] further downside during July-October as production rates roll over and a lift in November-December on pre-winter restocking."

He argues that restocking is driven by the need for ore ahead of the northern winter, when bulk movements become difficult.

Since 2010, iron ore prices have risen by an average 5 per cent month on month in November, and by a further 7 per cent in December. As a result, he expects prices to recover to more than $US100 by the fourth quarter of this year.Pressure on mines

Morgan argues that at current spot prices, around one-quarter of production is break-even to loss-making, which will increase pressure to close unprofitable mines.

"If high cost supply is slow to withdraw from the trade over time, then an oversupply situation [surpluses] will weigh on prices," he cautions.

Morgan says the iron ore market is extremely consolidated, with just four players controlling two-thirds of global production.

He warns, however, that this consolidation is breaking down as new railway and port systems are built in Australia. These include Fortescue (a new entrant from 2008 which now produces 155 million tonnes a year), Roy Hill (which is expected to start producing around 55 million tonnes a year from 2016-17) and perhaps even Baosteel/Aquila (which could potentially produce up to 300 million tonnes a year over time).

One risk, he says, is that "to prevent new entrants, perhaps the majors may be happy to see iron ore prices lower than they have been in recent years".

Although he is keeping a close watch on the iron ore price, he remains wary "of reading too much into a weak spot signal at the trade's seasonally weakest time".Cut forecasts

In contrast, Credit Suisse analysts have cut their forecast iron ore prices, and are predicting an average China-delivered spot price of $US90 a tonne for ore with 62 per cent iron content in the second half of 2014.

In addition, they say, "we expect prices to average $US89 per tonne in 2015 and $US87 per tonne in 2016, with the lowest period coming from the second half of 2015, when prices should trough at quarter average levels of $US85 per tonne".

After that, though, "we expect sufficient supply curtailments to gradually bring the market back to balance".

The Credit Suisse analysts point out that the huge boost in Australia's iron ore output means that it now accounts for around half of global supply. "The combination of last year's 17.3 per cent supply increase and this year's anticipated 18.3 per cent growth has lifted the country to a forecast 50 per cent market share, from 43 per cent just two years ago."

They add that "demand's inability to keep pace with so ferocious an expansion has already forced the most marginal of domestic Chinese producers to exit the market but the overall process of adjustment is still at an early stage".

As a result, they say "we are of the firm view that prices will need to go below real long-run levels of $90 per tonne (in 2013 US dollar terms) for a sustained period".


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[greengiraffe]

Triple threat taking China's steel industry to the brink

Lisa Murray AFR correspondent
1214 words
6 Sep 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Metals Falling demand, oversupply and tight credit has left factories shutting up shop.

Jiangyin At a steel factory two hours drive from Shanghai, two young men are trying to squash a large red suitcase onto a moped. "There's nothing to do here so we're going home for a ­holiday," they explain, before wedging the bag in place, piling onto the bike and driving off.

The workers are employees of Jiangyin Xicheng Steel Company and while they are happy to be heading home to nearby Anhui province, this is involuntary leave.

During the week, Xicheng temporarily shut down some of its production lines citing "operational difficulties".

The shutdown came as the benchmark ion ore price plunged to a fresh five-year low of $US84.30 a tonne on Friday, down 37 per cent since ­January 2014.

The private steel company, which sits just above the halfway mark in China's version of the Fortune 500, insists it is not about to file for bankruptcy. But it admits to having "liquidity problems".

"The property market slowdown has had a negative impact but the main problem is that the banks suddenly stopped lending," the company's media director Yang Zhendong told AFR Weekend at the factory compound. "We don't know why."

Xicheng's "difficulties" are likely to send a shudder through the Australian iron ore industry.

Already under pressure as the big players – Rio Tinto, BHP Billiton, Fortescue and Vale – ramp up production, it is also being hit by a sharp slowdown in China's property market.

And now they are facing a dramatic adjustment in the world's largest steel sector.Chronic overcapacity

For years, China's central government has been promising to address chronic overcapacity but the recent round of credit tightening suggests that policy may finally be having an impact. And not just on the smaller players. Xicheng is one of the biggest private steel companies in the country, producing roughly 6 million tonnes a year.

The credit tightening has also been exacerbated by a recent increase in banks' non-performing loans (NPLs), prompting them to become more conservative, and a crackdown on the shadow finance market.

"The government has tried in the past to address overcapacity with administrative measures but now it is focused on credit," Qiu Yuecheng, an analyst at steel products trading platform XiBen New Line, says.

"And with their NPLs increasing, the banks are already cautious."

Up until this year, Beijing had struggled to enforce a nationwide plan to restructure the steel sector, in a bid to rid it of small, inefficient and polluting mills. Provinces relied too heavily on the jobs and tax revenue provided by the mills and a booming property ­market ensured there was plenty of demand for steel.

That resulted in a significant expansion of the industry, with production capacity increasing by 200 million tonnes since late 2012, to an annual 1.1 billion tonnes, according to Bloomberg. And the steel companies borrowed heavily to do it. The China Iron and Steel Association (CISA) says the overall debt ratio for the industry stands at just under 70 per cent.

But those steel companies ramping up their operations were ignoring the warning signs in the property market. Investment growth has slowed dramatically this year as residential property sales slumped 17.9 per cent in July from a year ago.

Crude steel consumption fell 0.2 per cent in the first seven months of the year to 438 million tonnes. The small drop was partly offset by strong exports but prices are still wallowing near decade lows. Mr Qiu says Xicheng expanded rapidly in recent years, which may be why it was targeted in the lending crackdown.Return worry

It spent a lot of money recently, building two blast furnaces and, given the current outlook for the industry, banks are worried they might not get their money back.

But the company's debt problems may be even more complicated.

One steel trader suggested Xicheng, like other steel mills, was financed by one of its joint venture partners, China Rail Materials Group, a state-owned enterprise (SOE). This is a common practice in China with SOEs using their strong balance sheets, connections and government backing to make some money from lending to other firms, which may have trouble accessing funds. However, the trader said China Rail was now seeking to reduce its exposure to the troubled sector.

"It's very nervous about an increase in the number of distressed loans across the steel sector and is withdrawing credit," he said.

"A majority of private steel mills are reliant on SOEs for funding."

Xicheng's Mr Yang denied there were any problems with China Rail. He said the company, which has about 7000 employees, is already in talks with its lenders and local government authorities and the problem is likely to be resolved "soon".

A letter to staff sent this week insisted the company would "never close down" and wouldn't contemplate filing for bankruptcy.

Workers hanging around the compound's dormitories agree the company is probably "too big to fail" and that's why they are waiting for the signal to head back to the factory floor.

One woman, who drives a crane at one of Xicheng's steel facilities, was finishing a tapestry on Thursday afternoon while another man, who packages up steel coils for the company, was cleaning his bike.

"Until a few months ago, this company never had any problems and then all of a sudden in July I was told to take a six-day holiday," says Mr Hu. "Last month I worked just 10 days."

The company is paying Mr Hu roughly $10 a day while he is on forced leave. But he says it is not enough to support his wife and child. Down the road, the supermarket that sits in the middle of the factory compound is selling drinks out of a fridge that is switched off, under lights that are dimmed.

"Business has been slow this month and we don't want to use the electricity," says Mr Fan, whose family owns the business, which is mainly reliant on Xicheng staff.Further afield

Xicheng is not the only steel mill reporting credit issues. A report in the China Securities Journal on Friday said some mills in the country's main steel-making province of Hebei had also suspended production.

CISA vice-president Zhang Changfu warned the industry this week that a cautious lending environment was here to stay. At a steel conference in Ningbo, he told companies not to "put all your hopes on a loosening in credit conditions".

The more responsible approach to lending is a positive for economic reform in China and should set the foundations for a more sustainable industry. It also addresses some of the issues the country is facing with a fast-growing shadow banking market, where trust funds and non-banking businesses lend to riskier firms at higher interest rates but with little oversight.

However, traders say in the short-term, the steel sector is undergoing a painful adjustment and that is likely to mean a rocky ride for iron ore prices.

With Lucy Gao


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