kevin tang, brazil-china chamber: china - iron ore imports and the worldwide implications
DESCRIPTION
Kevin Tang, General Manager, Brazil-China Chamber delivered this presentation at the 2013 Americas Iron Ore conference. Americas Iron Ore is one of the most respected annual gatherings for North and South American iron ore markets. The agenda features iron ore industry and market developments; new project developments and expansions in North and South America; overview of steel demand; iron ore spot market price; infrastructure and transport challenges and investment opportunities. After five successful editions, the Americas Iron Ore Conference consolidates as the largest meeting place for executives and professionals of the steel and iron ore industry in the region. For more information, please visit the conference website: https://www.immevents.com/mining-conference/americas-iron-ore-conferenceTRANSCRIPT
China’s iron ore production, pricing and outlook
Kevin S. Tang - America’s Iron Ore – Rio de Janeiro, 11/11/2013
Steel & Iron ore imports, pricing and
production
Inventory, cost curve & volatility in prices
Central committee 3rd plenum reforms
Continued growth
Long term outlook
Chinese Iron Ore Imports and Crude Steel production
World crude steel output
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
Jan Feb Mar Apr May Jun Jul Aug Sep
2012
2013
China’s 2012-2013 y.t.d. 9% increase in production.
Hope for soaring demand?
Source: World Steel Organization
Increase in steel production driving price down…
… and steel inventories up
China’s growing share of iron ore imports = aprox. 70% of global trade
Brazil + Australia = aprox. 70% of China supply
Chinese iron price x domestic production
Chinese iron ore price x capesize index
Chinese iron ore imports
Price volatility results from market structure – Demand more
than supply
50% of imports through traders
Aprox 100 authorized importers (60-70 mills/ 30-40 traders)
Mills also have trading book and take advantage of their position
04/11/2013
Inventory at ports:
77,82 MM Tons
Oct-13
Inventories stable in 2013, down lowest levels in 3 yrs.
Producers lighten stock acquired during lower prices in 2011
Inventories should remain at recent history levels of circa 80 MM tons
Sep=13
Sep/13 = 110%
China – Price x Inventory
Chinese 62% Fe price index
04/11/2013
Inventory at ports:
77,82 MM Tons
Chinese 58% Fe price index
Iron Ore Cost Curve
Big 3 dominate low cost (<U$50/ton)
Chinese domestic production most expensive (>U$90-125/ton)
Despite continuous growth, large new capacity coming to market
should keep prices in check
Chinese high-cost domestic producers crowded out?
China - Produção Doméstica Vs. Importação
As downward pressure on iron ore prices continues with new added
capacity > iron ore/ steel demand.
Will continous Chinese domestic production expansion be viable? Not
likely
Politics in play: 3rd Central Committee Plenum (Nov 2013)
Most significant reforms in 20 yrs : Economic and
Social changes to continue prosperity and stability
To continue growth in more sustainable and balanced
way
Reduce distortions, modernize economy and promote
market efficiency
Prepare China for the next stage of development
Politics in play: 3rd Central Committee Plenum (Nov 2013)
Most significant reforms in 20 yrs : Economic and
Social changes to continue prosperity and stability
o Environment –
Cleaning up industry
Recycling / Scrap policy
Pressure on production
Efficiency
Industry consolidation
Politics in play: 3rd Central Committee Plenum (Nov 2013)
o Land reforms –
Continued growth in
countryside, equality
More infrastructure,
consumption and urbanization
o SOE and Financial reform –
Less subsidized interest rates to SOE producers
Reduced SOE power
Market liberalization
Focus on results
Politics in play: 3rd Central Committee Plenum (Nov 2013)
China steel stock of 6 billion tons (#2 USA has 3 billion tons)
Scrap to begin affecting future iron ore imports within 10 yrs
Steel of initial growth of China from 20 yrs will come to market
Today still heavily iron-ore dependant. Jan-Jun 2013 – Major
chinese steel cos. used 21.57 MM tons (-7% Jan-Jun 2012) due
to removal of scrap incentive
Energy constraint and greener policies,
favor recycling and electric furnaces
Xie Xie!
SP: Rua José Maria Lisboa, 41/ 4º andar Jardins, São Paulo, SP
Tel/ Fax: (11) 3885-7172 E-mail: [email protected]
RJ: Rua Senador Dantas, 71-12º andar
Centro - Rio de Janeiro Tel/Fax: (21) 2532-5877
e-mail: [email protected]