London (Platts)--5Feb2013/902 am EST/1402 GMT
Iron ore prices may fall on weak demand for steel, as a rebound in the price squeezed margins at mills without their own supplies of the steel raw material, according to a Fitch Ratings note Tuesday. Iron ore prices rose due to greater spot demand in China after a period of destocking last year, and likely Chinese mine idlings on high costs that provided further impetus for a price rebound, a report from the ratings agency said. "Iron ore prices have risen around 30% since the start of December, while the price of semi-finished steel products has remained practically unchanged, putting pressure on profits at steelmakers that don't have their own ore supplies," Fitch said. "This should help margins recover later in the year." "While we expect margin pressures to abate, iron ore prices have become more volatile as supply contracts have moved from annual to quarterly or spot pricing, with volatility rising 16% in 2012," the note added. Article continues below...Request a free trial of: Steel Markets DailySteel Markets Daily provides transparent daily and weekly assessments of iron ore, coking coal, coke, ferrous scrap and ferroalloys prices, plus insightful analysis and commentary on the day's market activities.
Iron ore prices may fall on weak demand for steel, as a rebound in the price squeezed margins at mills without their own supplies of the steel raw material, according to a Fitch Ratings note Tuesday. Iron ore prices rose due to greater spot demand in China after a period of destocking last year, and likely Chinese mine idlings on high costs that provided further impetus for a price rebound, a report from the ratings agency said. "Iron ore prices have risen around 30% since the start of December, while the price of semi-finished steel products has remained practically unchanged, putting pressure on profits at steelmakers that don't have their own ore supplies," Fitch said. "This should help margins recover later in the year." "While we expect margin pressures to abate, iron ore prices have become more volatile as supply contracts have moved from annual to quarterly or spot pricing, with volatility rising 16% in 2012," the note added.
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Steel Markets Daily provides transparent daily and weekly assessments of iron ore, coking coal, coke, ferrous scrap and ferroalloys prices, plus insightful analysis and commentary on the day's market activities.
Fitch expects "weak" European steel demand from the construction and automotive markets to lead to a drop in steel production. In China, the analysts expect the rate of steel demand growth has peaked and see growth ahead at below 5%/year. "These trends mean we expect the ratio of iron ore to steel slab prices to remain close to the 2012 level of 0.25x, rather than the high of 0.29x reached in 2010," it said.--Hector Forster, hector_forster@platts.com--Edited by Jeremy Lovell, jeremy_lovell@platts.com
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