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World’s Steel Giants Jockey for Position

Commodities / Metals & Mining May 02, 2010 - 04:30 AM GMT

By: Anthony_David


Driven by strong Chinese demand and some recovery in OECD markets, global mining and exploration giant Rio Tinto reported a 39% jump in its Q1 iron ore production figures. Rio Tinto followed the announcement with a 1.7% raise, from 230 million tonnes to 234 million tonnes, in its 2010 iron ore production target. Chief Executive Tom Albanese of Rio Tinto said that he was hopeful of his company’s growth on the wave of economic recovery reported in Asia.

Mining leader, BHP Billiton Limited, similarly announced an 11% jump in its Q3 iron ore production. Although Chinese demand is credited with the upward trend, the company has pointed out that expansion projects and wet weather in Australia restricted its output and limited its ability to benefit from China’s reported 22% year-on-year growth in steel production. BHP Billiton has also indicated a higher production target for the next few quarters as demand from the infrastructure and automobile sectors shoot northwards.

Glyn Lawcock, an analyst at financial company UBS AG said, “Global steel production rates suggest continued higher demand for iron ore and coking coal”. The forecast bodes well for the manganese market as well. A ready example of that is BHP Billiton’s production of manganese ore, which shot up by 133% year-on-year during the same quarter because of high steel demand. The company’s quarterly manganese alloy production rose by 64% year on-year as well. BHP Billiton’s manganese sector is reportedly running at full capacity because of the strong steel demand.

China, meanwhile, has announced a Q1 gross domestic product (GDP) of $1.19 trillion, indicating an undeniable recovery of the world’s third largest economy. The 11.9% growth is several points higher than the 5.7% reported for Q1 last year and the 10.7% reported in Q4 of 2009. However, Li Xiaochao of the National Bureau of Statistics (NBS) has pointed out that the 2009 comparison base was rather low and the government’s stimulus package played a large role in the high GDP growth. Nevertheless, the growth was better than expected and it was driven by a surging domestic demand. Asian stock markets rose in the immediate wake of the announcement although the Shanghai composite fell because of falling property stocks.

In early April, China announced counter-vailing duties on grain-oriented electrical steel from the US and anti-dumping duties against steel from the US and Russia in what can only be termed as apparent retaliation to Washington’s decision to impose tariffs on Chinese steel pipes used in the oil industry. Grain-oriented electrical or silicon steel is used to build the cores of electric motors, generators and high-efficiency transformers.

China’s Ministry of Commerce announced that importers would now have to pay an anti-dumping tax of up to 24% for Russian steel and up to 64.8% for products from the US. Investigations have revealed that US companies were granted government subsidies on the steel, and China has subsequently announced a countervailing tax of up to 44.6%. The decision came into effect from April 18, 2010. “This is China’s first anti-dumping and anti-subsidy investigation,” said ministry officials. “China is sticking to the principle of being fair and transparent in the investigation procedure, which was properly carried out according to the law.”

By Anthony David

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© 2010 Copyright  Anthony David- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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