China's steel makers are suffering from mounting costs, analysts
said on Wednesday. But they are optimistic about the industry's
performance for the current year.
One of the reasons for the cost rises is increasing iron ore
shipping charges.
Analysts said now is the peak season for shipping dry and bulk
cargo, and demand for ore and coal are on the rise worldwide. The
result was overcrowding at major international harbors, which
helped drive up shipping charges. The analysts forecast that global
demand for dry and bulk cargo shipping will continue to be robust
throughout the year.
Price hikes for iron ore, shored up by strong demand, also
accounted for increases in cost for steel makers.
Expecting a price rise on international spot goods market, steel
enterprises, with enough money in hand, will likely buy more ore to
replenish stocks before a new fiscal year begins, according to
analysts.
Meanwhile, the 2007 qualification criteria for iron ore
importers have been released, raising thresholds. This has
compelled those who do not qualify for the new standards to buy as
much as possible before the new criteria come into force.
The price of domestically-produced iron ore is also rising. When
prices of domestic ore start to come close to those on
international markets, steel makers will prefer imports because of
their higher quality. This has buoyed up prices of imported ores,
according to analysts.
Steelmaking enterprises in Tangshan, north China's Hebei
Province, have increased their share of imports in their total
supplies from 20 percent to 30 percent to 40 percent to 50
percent.
Foreign iron ore arriving at Beilun Harbor in east China's
Zhejiang Province is now priced 30 to 40 yuan/ton higher than the
end of 2006. Crude iron powder from Brazil is valued at 750
yuan/ton (97 U.S. dollars/ton), up four U.S. dollars from the end
of last year.
But analysts are optimistic about the steel sector's performance
for the whole year. They believe cost rises, which are not
sustainable, will be offset by improvement in efficiency of steel
makers and price rises for steel products.
The analysts said increasing shipping charges will have less
effect on large steel manufacturers, including Baosteel, Wuhan Iron
and Steel and Capital Iron and Steel. The large companies have
signed long-term shipping contracts, which ensure relative
stability of shipping charges.
The analysts said oil price hikes and more vessels will limit
shipping cost rises in the long term.
(Xinhua News Agency January 18, 2007)