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Price decline
Benchmark steel prices in China, the biggest consumer of the metal, have fallen 10 percent from an 18-month high on April 15, according to Beijing Antaike Information Development Co. Tangshan Iron & Steel Group, part of China's largest steelmaker, and Baotou Iron & Steel Group may shut plants for maintenance this month as prices fall, UC361.com analyst Hu Yanping said on June 2.
"If they cut production they'll be buying less ore and that would likely push ore costs lower for the fourth quarter, benefiting all producers," Applebaum said.
Baosteel and China's bigger steelmakers will respect their iron-ore contracts even as spot prices may fall below the contract levels in the third quarter, Xu said.
"We will honor the contracts, although we may question the rationality of the quarterly pricing system in the negotiations with the suppliers," Xu said. "It's hard to say we will see more supplies from the spot market. Steelmakers have various purchasing strategies."
Quarterly iron ore prices may rise in the third quarter and drop in the fourth quarter, Xu said.
Vale SA, BHP Billiton Ltd and Rio Tinto Group this year abandoned a 40-year tradition of setting prices annually in favor of quarterly contracts, with the Brazilian mill winning a 90 percent increase for the April period.
Quarterly prices are based on the average index prices of prior three months, Vale SA said last week in Shanghai.
Bloomberg News