Darker Days Ahead Seen for World's Iron Ore Industry
Darker days loom ahead for the world's miners especially of the key steel-making ingredient iron ore as an oversupply of the key commodity could dampen the positive forecast of renewed appetite made at the beginning of the first half of 2012.
Zhang Dianbo, head of purchasing at China's Baoshan Iron and Steel Co Ltd., on Thursday said the world's appetite for iron ore will drop, not grow, in the remaining months of the current year, triggered by an oversupply of the commodity.
Industry experts had earlier banked that China will get to renew its appetite for iron ore in the coming months.
"Along with slowing industrialisation, urbanisation and infrastructure investment, China's steel demand growth has been falling," Zhang said in Reuters News.
"Average annual growth for China's steel demand between 2011 and 2015 was seen at 4.2 per cent, but whether we can reach that growth is now a question," Zhang added.
"The golden age for imported iron ore in the Chinese market has gone, and will never come back," Wang Guoqing, deputy director at the Lange Steel Information Research Center, told China Daily.
The projection that demand for and prices of iron ore will rebound could be next to impossible. Prices of imported iron ore have plummeted to its lowest since 2009 to below $100 a metric ton, compared with last year's high of $190 a metric ton.
"Just last week, spot prices were still hovering at $110 per ton, and futures were around $99 per ton. Today, these have fallen to around $90 spot, $86 for futures. Spot prices fell 18 per cent and futures fell 13 per cent in just a single week," Paolo Santos of www.seekingalpha.com wrote.
Steel producers in China are using majority of iron ore imported from overseas, which have better quality compared to local iron ore, forcing many domestic iron ore mines to close shop. But many steel plants have suspended new and additional purchases because of poor demand for the metal as well as declining steel prices and surging inventories.