Erdemir: Iron ore price trend to determine future iron ore consumption

Friday, 28 November 2014 15:09:00 (GMT+3)   |   Istanbul
       

During the "New Horizons in Global Steel Markets" 9th SteelOrbis Annual Conference held in Istanbul on November 28, Erdemir Group purchasing coordinator Sevkinaz Alemdar discussed the latest situation in and future prospects for the raw material markets. She indicated that global iron ore supply grew faster in 2014, as major mine expansions were completed, while strong operational performances have resulted in greater supplies than initially forecast. Mrs. Alemdar said that a mismatch between imports and demand resulted in high iron ore inventory levels at Chinese ports.
 
In mid-2013, coking coal prices started to decrease, resulting in 40 million mt of coking coal supply exiting the market, Mrs. Alemdar stated, going on to say that 50 percent of global output remains unprofitable at current prices, with major global investment projects being kept on hold due to low price levels.
 
Commenting on the decline in iron ore prices, the Erdemir Group official said that the trend of iron ore prices will determine steelmakers' future consumption of the steelmaking raw material, adding that if iron ore prices will maintain the same trend there will be no motivation to invest in new finished steel capacities. Regarding iron ore producers, she stated that in particular the big three producers have the advantage of low-cost production and so they keep extracting ore despite the lower prices, while she emphasized that the cost reduction is based on production increases and for this reason the major producers have no reason to stop producing.
 
With regard to scrap, Mrs. Alemdar underlined that scrap prices are more correlated with finished steel product prices, admitting that a balance will exist between iron ore and scrap prices in the long run but not in the short term. She explained that, in the case of scrap, prices also depend on availability, and that scrap suppliers could choose to stop collecting scrap at some point, while in iron ore, if an investment has already been made, then production continues, as in the case of integrated steelmakers.

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