Read the latest note from steemint on China’s export policy
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I am in full agreement to this … China’s direction is clear - It will reduce virgin steel capacity impacting global iron ore demand … That will increase Chinese competitiveness in steel
"The mills should resist exporting and, secondly, instead of exporting regular or low-end products, should concentrate on exporting high value-added items, ++ Increase in EAF steel production
This is how US , EU , Japan and Korea have moved up the value chain once they completed basic infra development .
The question is what is game for Indian steel players …
Game for Indian steel players is what happens to supply and demand in India and how the industry will be protected from imports … Remember till 2 years back Indian steel players wanted protection from Japanese and Korea imports and Govt imposed MIP for their support .
So Indian players less competitive - unless when Iron ore prices are high because Japan , Korea and China all depend on Brazil and Australia for the same …
The Indian steel players can only hope GOVT will not penalise them for excess profiteering in this cycle . Already GOVT has moved steel players out from Recently announced export benefit scheme … Hope GOVT is not much harsh on them in future
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He is of the view that, steel price may not come down because input costs have gone up. And iron ore price softening will help them sustain margins. Iron ore producers will be impacted because of China cutting production.
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Why did the price of iron ore plummet
Following are the reasons
- China’s import of iron ore in the month of July fell by 21.4 per YoY to 88.5 million tons due to achieving the dual-carbon goal (burning coke and carbon coming out of smelting ore)
- China acquired part of the project of the Simandou Iron Mine in Africa, the world’s largest iron ore
- China Abolish the steel export tax rebate. Chinese steel companies work on very thin margin, abolishing export incentives has impacted profitability, drop in steel production
- Increased usage of steel scrap directly into arc furnace. Steel scrap prices started going up
- Australian iron ore is considered the best quality, due to geo political tensions China wants to punish Australia hence they stopped import of iron ore and coke
Iron ore prices are cyclical, IMO the prices will come back when US’ investments kick in, for infrastructure as part of the 3.5T USD
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I also read that July and August are historically low demand months
The prices have not dropped below June highs so this quarter results for steel companies should still be as good as June quarter
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JSW Steel’s Seshagiri Rao On The Ongoing Steel Cycle: Talking Point - YouTube Talks about steel industry in general and JSW steel in particular
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GUJ ALKALIES have increased caustic prices again . its around 34000 today.
disc : tracking caustic price as invested in TGVSL
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Where we can track price increase of Cautic soda by Gujrat alkali.
Can u share the link.
Call up local dealers. Gacl website has list of dealers. A few of them pick up. North India follow pacl. Prices have stabilized for now between 32-34k.
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Fantastic insights in the video. He mentions increasing Electrode prices. Couple with global move towards pollution reduction (BOF to EAF/DRI), robust demand both domestic as well as Western markets and upcoming Infra spend in US and EU, this really setups Graphite Electrode makers are chief beneficiaries - irrespective of (some) volatility in Ore, Coke or Steel prices. In my opinion, this is the safest way to play the cycle.
Disc. Invested in GIL and HEG and continue to nibble in corrections
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In TGVS report they have said that caustic import in India is down to below 10 % from 16 % gradually , that’s helping in price rise too
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Report on Aluminum -
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With crisis surrounding Evergrande and its spillovers , and US tapering, Is it correct to consider end of supercycle or at least beginning of the end of supercycle.
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Evergrande is a real estate company.
Iron ore is imported by steel companies in China.
And, China has reduced their steel output and exports deliberately to increase steel prices and reduce iron ore prices.
As a result, global steel prices continue to be at record highs.
Today Billet prices in India are up by 1.3% and touching highs.
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Good article on the recent rally in LNG prices:
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I have a feeling that the Evergrande issue bursting open now has something to do with China trying to kill two birds with one stone.
Bird 1: The Evergrande issue has surfaced not due to any investigation or discovery, but because of China’s change in regulations i.e. “three red lines” policy. Evergrande (and indeed many in the real estate sector in China) were known to be in dangerous territory for a long time. China probably created the three red lines policy to effect a controlled implosion, rather than let the problem fester and compound. So this was always in the works.
Bird 2: China has been trying to control the surge in commodity prices (i also include cooling the demand for steel within this bucket) for a while now. It has tried delivering messages, releasing strategic reserves, got some inactive mines operational etc. A controlled implosion and the “fear” it may spark might just put some hard brakes on commodity prices!
Will be interesting to see how this plays out.
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Yes, China has been deliberately trying to control commodity prices and especially hurt Australia.
But, this has backfired big time.
China stopped Australian coal imports more than an year back. This has damaged the whole coal supply chain globally today. There is coal shortage everywhere. Coal prices are rocketing with no end in sights. Who is suffering the most- China as it has to import coal at sky high prices from US and Indonesia. Australia is again benefiting.
In steel industry- it has reduced output of steel firms with a very long term plan of reducing steel output. It can not go back on this plan now. Eventual result will be again similar in an year from now I guess- Steel shortage, skyrocketing prices- similar to what happened to coal prices.
Let us see what happens. It is an interesting game.
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