When is bad sector news good news for a smart enterprising company like ADI? Following is a news release that I found on Kitco. I will then comment on it on my next immediate post. :)
April 28 (Bloomberg) -- Iron ore producers are betting on an “impossible†revival in demand from China, the largest consumer of the material, and holding out on price reductions, the China Iron & Steel Association said.
The expectation for the second quarter is unrealistic given the state of China’s economy, Luo Bingsheng, vice chairman of the association said today at a press conference, in Beijing.
Chinese steelmakers are asking for price cuts of as much as 50 percent for annual contracts of iron ore, and are locked in talks with producers Cia. Vale do Rio Doce, Rio Tinto Group and BHP Billiton Ltd.
Larger Chinese mills incurred losses for five straight months from October, the government said last week.
“Miners are pinning hope for a recovery in the second quarter,†Luo said. “Chinese steelmills will still be in a relatively difficult period this quarter.â€
Angang Steel Co., China’s second-largest listed steelmaker, last week said it may incur a first-half loss on falling demand and prices. China’s benchmark steel price dropped 9 percent in the first quarter.
Prices of hot-rolled coil, the benchmark, may fall further in the second quarter because of overcapacity and a surge in imports, Qi Xiangdong, deputy secretary general of the association said at the same conference.
Hot-rolled coil is used to make appliances and auto parts.
Wide Disparity
China’s economy grew 6.1 percent in the first quarter from a year earlier, the slowest pace in almost 10 years. The nation is spending 4 trillion yuan ($586 billion) on a stimulus package to revive growth, and will build infrastructure including bridges and roads.
The construction demand from the stimulus may boost prices of long steel products, such as wires and rods, Qi said today.
There is a “wide†disparity between the iron ore price demands of Chinese steelmakers and producers, Luo said. Chinese steelmakers haven’t yet given up on the negotiations, he said.
A price cut of 20 percent will grossly underestimate the oversupply of iron ore, Luo said.
Vale, the largest iron ore exporter, has offered steelmakers a 20 percent interim discount until benchmark prices are settled.
Benchmark contracts start from April 1 and prices are typically backdated once agreed upon.
Iron ore stockpiled at ports in China reached a higher- than-normal level of 70 million metric tons, Jia Yinsong, an official with the raw material division of the Ministry of Industry and Information Technology, said today at a Metal Bulletin conference in Beijing.
April imports will drop from March, the association’s Luo said.
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