Falling iron ore prices are not helping Chinese steel companies because of even sharper declines in steel prices amid weak demand, an industry observer said.
Iron ore prices have fallen over 20% since June 11, but Xu Xiangchun, director of steel market information provider Shanghai Ganglian E-Commerce, said the market has yet to bottom out.
According to Xu, the fundamentals in the iron ore market have not changed and are deteriorating, and demand for both iron ore and steel in China is weak. Yet despite the weak demand, cheap supplies of iron ore continue to enter the market, further weighing on iron ore prices, with China's steel sector remaining in a downturn, according to American investment firm Sanford C. Bernstein.
Out of 13 listed Chinese steel companies that gave guidance on their first-half results, seven said they would post a loss for the first six months of the year, including SGIS Songshan, which estimated its losses at 680 million yuan (US$109.50 million) over that time.
Chinese steel companies also face a challenging market because the industry is in its traditionally slow season, made worse by the arrival of the rainy season. This has come after their joint efforts to control prices failed.
Although lower iron ore prices help reduce costs, Chinese steel makers have been hurt by an even sharper drop in steel prices, Xu said.
Source: Want China Times
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