Latest disclosure in Japan and the three mines in Q2 2010, a preliminary agreement on prices reaching record highs, the period shortened from 1 year to 3 months. From this ore prices rose sharply in China agreement has been inevitable; but the cost can be smoothly passed on to downstream industry profit as the key resource section which will highlight the cost advantages of enterprises.
Steel rose darling of
By the rising cost and demand is expected to rebound to jointly promote, last week, domestic steel prices continue to rise sharply, Myspic steel price index to 160.7, 3.1% from the previous week, rose 29.7%. Long products and plate in the week rose 4.1% and 2.1% respectively year on year rise of 29.4% and 31.4%. Specific varieties, thread and wire the week rose the most, were 4.0% and 4.2%, or the expansion of the previous week, reflecting the gains, such as construction steel rainbow.
At the same time, stocks of iron and steel to continue to accelerate. Last week, major cities combined length and sheet stock for the 17.29 million tons, down 616,200 tons chain, decline to continue to expand. Social stock for the third consecutive week of decline, reflecting lower demand for turnaround, the end user started to actively purchase.
In addition, the major steel product ex-factory price increases last week, the momentum continues to climb, market sentiment continue to heat up. Increases in steel prices stimulated a substantial increase in market activity, terminal requirements and small traders have to follow up. With the future demand for iron ore talks to gradually pick up and the dust has settled, is expected to high steel prices will continue to run. In the "do not buy or buy up" driven by psychology, mental reluctant sellers, dealers will push prices up further.
Needs help pick up the cost of transfer
With the agreement will last a long association in the April 1 is finished, the 2010 results of annual iron ore negotiations on the future trend of steel prices and steel industry will have a significant impact on operating conditions, deserves special attention. According to foreign media reports, the Japanese steelmakers and Brazil's CVRD iron ore imports prices this year has identified 110 U.S. dollars per ton, Rio Tinto and CVRD fine ore FOB price increase was 80% and 103%, the absolute amount and up gains have hit a record high. In addition, the agreement reduced the price for the period from 1 year to 3-month issue, the Japanese steel makers and iron ore suppliers have basically reached an agreement.
China's iron ore negotiations now nearing completion, according to Japan's negotiating position and attitude of the three mines of price increases, the price of iron ore rose inevitable, or could hit the highest record, the cost can be smoothly passed on downstream become the key to the steel industry profits.
Historical experience, the price of iron ore, steel and iron and steel enterprises was positively related to the overall profitability of the mine is usually accompanied by rising steel prices rose and profits rise. The measure, if ore prices rose 100 percent, rising steel costs about 630 yuan / ton in the spot steel prices rose after the Spring Festival has reached 600 yuan / ton, the major steel mills up the last two months the cumulative rate of ex-factory price also reached 400 - 600 yuan / ton, is expected to rise again next month.
In addition, steel stocks fell for three consecutive weeks that demand for iron and steel industry has entered a golden period of improvement, help pass the cost of steel. Expected to enter the second quarter, the downstream industry will gradually into full swing, the demand will continue to pick up, with the advent of the traditional high season, apparent steel demand will continue to improve. Then the social stock of high pressure will continue to be eased, steel prices are also expected to uplink power to demand from the real cost to achieve the sound up. In addition, the current spot purchasing still is the mainstream channel for ore purchase, and ore prices is expected to be completed in the spot market become difficult to continue high, Q2 will be stabilized.
Resource advantage in steel prices
Although the advent of steel demand season pass cost benefit industry, but rose sharply in the context of iron ore, corporate profitability will face division.
Specifically, assuming a long association to Japan agreed price of 110 U.S. dollars / ton, sea freight to 15 U.S. dollars / ton basis, so long association mining CIF 125 USD / tonne, equivalent to about RMB 856 yuan / ton. Compared to 1100-1200 yuan / ton in the spot price, cost price advantage despite a long association still exists, but significantly reduced. Further, if a long association price rose more than 100% year on year, then have a high proportion of long steel prices alone cost advantage will be even more weakened.
However, the resource cost of the basic iron ore steel enterprises 700 yuan / ton, sharply higher prices if a long association to promote the spot price at 1,000 yuan / ton or more, then the cost advantage of such steel prices will be very obvious.
