It is reported that WISCO (Wuhan Iron and Steel Corporation) signed a cooperation agreement with China’s logistics and shipping giant SINOTRANS Friday to conduct cooperation in iron ore and steel shipping.

WISCO, the parent company of Wugang, is one of China’s major state-owned steel enterprises. Currently, the company is striving to expand business in Central and Southwest China, which will need lots of shipping support.

SINOTRANS, the largest key inland shipping corporation and the third largest shipping company in China, possesses worldwide businesses in both comprehensive logistics and shipping.

Earlier, WISCO started strategic cooperation with China Shipping Company, another shipping giant, from October 2007 when the then shipping cost was too expensive even to exceed the iron ore price.

It is said from Li Shijun (vice secretary general of CISA) that motivation for the steel production in China mainly comes from domestic development when demand on the international market is declining, said .

The development is sustainable even after the Chinese government’s huge economic stimulus plan comes to an end. The government’s economic stimulus plan, especially the large-scale investment in infrastructure construction, has boosted China’s steel industry to recover ahead of other countries.

China’s 80,000-kilometer railway network saw the construction of another 30,000 new kilometers underway this year. Some 2.39 million tons of rail tracks have been produced in the first half of this year, up 105 percent over a year ago.

However, Li noted it is unnecessary to worry about the China’s steel industry would lose development momentum after the government’s stimulus plan comes to end.

The automotive industry, an important steel consumer, has witnessed a considerable sales this year with the government’s stimulus plan, and it still has plenty of room for development in China even without the stimulus plan, Li added.

At present, China owns only 37 units of automobiles for every 1,000 people on average, while the world’s figure has already reached 140 units.

Meanwhile, the country’s urbanization will also support steel industry development, though Li warned not to over-estimate the effect of this.

It is reported that the debate over the next year’s iron ore benchmark prices has got off to an acrimonious start with China seeking to separate its negotiations from other countries while global giant miners refuse to budge downwards on prices.

Shan Shanghua, secretary-general of China’s top iron ore negotiator China Iron and Steel Association (CISA), said on Friday that iron ore contracts should run for a calendar year instead of beginning on April 1, according to the Japanese financial year.

“We will not insist on other countries taking China’s iron ore price as a reference,” he said at an iron ore conference in the coastal city of Qingdao.

The iron ore conference is usually regarded as the unofficial start of benchmark price negotiations for the next contract year.

“There may be another failure in agreeing a benchmark price next year, as happened this year, if CISA sticks to its position,” a mining executive familiar with the negotiations told China Daily on the sidelines of the conference on Friday.

“BHP prefers to use spot prices, which are market-oriented and index-linked,” he said. “If both sides are not happy with the benchmark price negotiation, the next year ore trading might again be based on spot rates.”Iron ore is the only commodity that is negotiated with a benchmark price system. Other commodities such as copper and oil are linked to an index.

This year’s iron ore price negotiations became deadlocked in June when China insisted on a 45-percent discount on 2008-09 prices after a 33-percent cut in benchmark iron ore prices had been set with other Asia steel mills.
Shan said Chinese steel mills would not be able to make money at the current price that iron ore producers are demanding because an oversupply is causing steel prices to fall sharply.

“If the demand side is always losing money while the supply side is always making huge profits, can that relationship survive long?” he asked, insisting that global miners should offer better terms.

Chinese iron ore imports rose 36 percent to 469.4 million tons in the first nine months from a year earlier, the Customs said on Oct 14. Shipments have exceeded real demand by 50 million tons, the steel association said on Oct 12.

But mining executives from iron ore producers said the iron ore price was driven by demand, even if the demand side suffers lower profits. As long as the demand is there, there will always be possibility of rising prices.

Miners are optimistic because the economic recovery is leading to increased demand for steel.

Samarco Mineracao, an iron ore pellet joint venture between miners BHP Billiton and Vale, expects to produce at full capacity next year as demand recovers, its chief commercial officer, Roberto Lucio Nunes de Carvalho, said on Friday.

“Our expectation is to produce at full capacity of 22 million tons in the next year,” he said. “Industry demand is improving. Next year will be much better than this year.”

However, some Chinese steel mills are not optimistic about next year’s steel demand. China’s steel industry may end up losing money next year as oversupply weighs on prices. That might force steel companies to cut production next year, said Han Weidong, deputy chief of the market section of Hebei Iron and Steel Group Co Ltd.
“China’s domestic steel demand is unlikely to reach 600 million tons next year, while tight bank lending next year could hurt both demand for steel and expansion at steel mills, restraining growth in iron ore consumption,” he said.

A sales representative from a Hebei-based private steel company also said his company felt times were hard now because steel prices have fallen sharply since August and the iron ore spot prices remained at a high level. He also said that if the situation continues for a month, they may make cutbacks.

It is reported on Oct. 14 that soaring prices are likely to dent the demand for gold tomorrow, which is Dhanteras.

Merchants are expecting demand to fall by as much as 50 per cent, with buyers opting for smaller items.

The yellow metal rose to a record high of above $1,070 an ounce on Wednesday in London as the dollar slid to 14-month lows against the euro and oil prices inched towards $75 a barrel, boosting interest in commodities.

In India, where markets are influenced by global trends, prices are sizzling at record levels. In Calcutta, pure gold is at Rs 16,265 per 10 gm after scaling Rs 16,385 yesterday.

Dhanteras, when precious metals are bought in the belief it would lead to prosperity, generally accounts for sales of 15-20 tonnes of gold. But when consumers throng to jewellery shops and banks on Thursday, they are expected to look for smaller items.

“This year, our new initiative has been the 2 gram coin,” said an executive in a private bank in Mumbai. “Smaller coins are definitely going to sell more,” the executive added.

Traders and dealers said high prices, inflation and the economic slowdown are turning people into cautious buyers. “We see gold demand to drop by 50 per cent tomorrow because prices are ruling at an unaffordable level now,” Bombay Bullion Association president Suresh Hundia said.

Dhanteras is also expected to show Indians’ growing love for gold as an investment in the form of coins and bars rather than jewellery.

Jewellers and traders said the shift towards buying bullion over the past 4-5 years was here to stay as more consumers realise it is the more economical way to buy gold.

It is said from Harmesh Arora (director of NIBR Bullion Pvt Ltd, a Mumbai-based gold refinery that sells coins) that now even small investors have started buying gold coins. They collect it for their children.

It is reported from industry consultancy Umetal on Saturday that China’s Baoshan Iron and Steel Co Ltd (Baosteel) has cut prices for its major steel products by 9-13 percent for November sales versus the October tag.

Baosteel, the listed unit of China’s largest steelmaker, would cut the price of its major hot-rolled steel coil by 400 yuan ($58.61) per tonne, while reducing its major cold-rolled coil price by 700 yuan per tonne, Umetal said.

Baosteel’s price of the major hot-rolled steel coil would be 3,942 yuan a tonne for November, while the price of the company’s major cold-rolled steel coil would be 4,676 yuan a tonne, according to Reuters’ calculation.

It is said from the World Steel Association, the global steel market has bottomed and will grow by 9.2 percent next year as demand rebounds in the U.S., Europe and Japan.

“There are clear signs that the bottom has been reached in the market,” Director General Ian Christmas said in an interview in Beijing today. Consumption may rise to 1.2 billion metric tons next year, the association said.

Steelmakers are restarting output at mills in China, Europe and the U.S. as the economy shows signs of recovery. ArcelorMittal, the largest, forecast a third-quarter pretax profit after three periods of losses, and China’s Baoshan Iron & Steel Co. said earnings will rise “significantly” in the second half as demand from makers of cars and appliances expands.

“China has confounded our expectations,” Christmas said. Steel consumption in the Asian nation may expand 19 percent this year to 526 million tons, helping to limit the global decline, the association said.

Apparent steel demand, which excludes inventories, will fall 8.6 percent globally this year, better than the 14 percent decline forecast in April, the association said. Without China, demand would fall by 24 percent, it said.

China’s steel output, the largest in the world, reached a record this year as the government spends $586 billion on a stimulus program. Chinese benchmark steel prices have gained 20 percent since November when the stimulus was announced.

Restocking PaceThe association, which represents about 180 steelmakers globally, is holding its annual meeting in Beijing this week.

The emerging economies of China and India will rebound faster than the economies of the Organization for Economic Cooperation and Development which may have a “slow, painful” recovery, Christmas said.

Plants in the U.S. were operating at capacity as low as 45 percent because of a slump in demand, Lakshmi Mittal, chief executive officer of ArcelorMittal, said today at a press conference in Beijing.

The pace of restocking in the U.S. has improved, said Mittal, the outgoing chairman of the association. The best opportunity for consolidation in the industry is in China, he also said.

Steel prices in the U.S. rose 13 percent in September as inventories hit record lows after producers cut output, Purchasing Magazine said Sept. 30U.S. DemandU.S. steel demand will probably fall 39 percent this year, and rebound 19 percent next year to 72 million tons, the association predicted. Steel use in the European Union will plunge 33 percent this year to 122 million tons and jump by 12.4 percent next year, it also said.

Apparent steel use in Japan will drop 31 percent this year and recover by 16 percent in 2010 to reach 61 million tons, it said. China’s demand will rise 5 percent in 2010, and India’s will grow by 12 percent, it said.

According to the World Steel Association, China produced more steel last year than the combined output of Japan, the U.S., Russia and India, the next four biggest makers.

According to information released at a press conference of the 9th Secondary Metals International Forum/Exhibition & Trade Fair, China nonferrous metalshas scrap stockpiled over 200 million tons, a precious resource for the secondary nonferrous metal industry.

China’s output of secondary nonferrous metals reached 5.3 million tons in 2008, taking 21 percent of the country’s total nonferrous metal output. The industrial output value exceeded 220 billion yuan during the same year, said Wang Gongmin, chairman of the Recycling Metal Branch under the China Nonferrous Metals Industry Association (CMRA).

Development of the secondary nonferrous metal industry can help save energy, reduce emissions and develop the recycling economy of China. Compared with directly produced metals, CMRA data shows that China’s secondary nonferrous metal industry saved 202 million tons of standard coal and 9.3 billion tons of water from 2001 to 2008, with a discharge reduction of 5.6 billion tons of solid wastes and 2.55 million tons of sulfur dioxide.

In China, the majority of secondary nonferrous metal enterprises are private companies, which provide over 1.5 million jobs for the country.

On November 3 to 5, in southern China’s Guangzhou city, the Secondary Metals International Forum/Exhibition & Trade Fair is to be held.

It is said from analysts that steel prices in China still fall path after the National Holiday, and commercial stockpiles, especially that of sheet products, have increased by a large margin.

China’s top steel maker the Baosteel Group, the parent company of Baosteel (600019.SH), announced last Saturday to cut its November prices by 250 yuan to 500 yuan/ton, and to offer discounts on particular products in October.

According to Baosteel’s November pricing policy, prices of thick plates, ship plates and boiler container steel will be cut by 400 yuan to 500 yuan/ton; straight carbon hot-rolled products by 400 yuan/ton; machine use products by 400 yuan per ton; pickling products by 250 yuan/ton; hot-rolled galvanized zinc, electro galvanized zinc, color-coated sheets, and electric steel will be cut by between 300 and 400 yuan/ton. Meanwhile, the company will give compensation of 100 to 350 yuan/ton for ordering hot-rolled and cold-rolled products in October.

Although prices are falling, steel plants are reluctant to limit production proactively, because the up-stream fuel prices and hence their production costs are also dropping.

Currently, trading volumes are sluggish, as there is very much a wait-and-see atmosphere.