Iron ore in 2008, "up" in the possession of insurance
Prices thinking inertia and reality of the future price of contrast, the Chinese iron ore traders and consumers, will inevitably mean a significant market risk. Well done, complete the agreement price may be "stuck high"
Rose due to "habitual thought"
Recent rumors that the 2008 agreement the international iron ore market price (base price) than the previous year rose 65 percent, much higher than the 2007 price increase of 9.5%. Although the final outcome of the negotiations to the end of February to be known, but the international market this year, rising iron ore prices seem a foregone conclusion, no doubt the cost of Chinese steel companies will therefore increase.
2008 International market price of a sharp rise in iron ore price agreement, mainly for three reasons: First, the international market of iron ore trade settlement currency?? Dollar devaluation and depreciation is expected to continue; second iron ore supply-side a high degree of monopoly; Third, strong global economic growth in recent years, iron ore demand in the "inertia of thinking."
Prices in the above three factors, the third factor is the most important. Because consecutive years of global steel demand, stimulated the production of steel, especially the expansion of China's steel production, it led to a seemingly endless demand for iron ore and steel product prices by record-high upward pressure on the release of its out. Therefore, the world economic growth?? Steel demand?? Steel price increase?? Iron ore prices, seems to have become this century's formula whereby the steel market, and dominate people's thoughts, both iron ore The producers, traders or steel companies are actively or passively accept the "rules." In 2008 the international market price of iron ore price agreement rose sharply once again, but this is the "thinking inertia," the embodiment of it.
External support conditions are changed
It is noteworthy that entered after 2008, due to changes in a number of conditions, especially if the U.S. economy into a severe recession, a significant slowdown in the world economy, therefore, continued for many years of rapid economic growth?? Demand?? Price inflation cycle will therefore break. In other words, the future international market iron ore prices may be reversed. Prices continued to rise over the years the situation could give the market price of the fall. At the same time, the mindset of people are still staying up in the inertia of the past. This price rise thinking inertia and reality of the future price of contrast, the Chinese iron ore traders and consumers, will inevitably mean a significant market risk. Well done, complete the agreement price may be "tied up high."
This risk mainly reflected a significant slowdown of world economy, resulting in China's steel exports dropped significantly. With the rapid growth of world economy, China's steel exports increasing in 2007, China's exports of steel and billet was 69.08 million tons, has become the world's top iron and steel exports of power. If in 2008 the U.S. economy into a severe recession, a significant slowdown in the world economy, estimated annual steel products (steel, billets, pig iron, iron alloy, the same below) more than 30% decline in exports, exports fell to 5,000 metric tons a year level, or even reduce more. Moreover, in the direct reduction of iron and steel exports, China's automobile, shipbuilding, machinery, household appliances, hardware and other indirect exports of steel products consumption, will the U.S. recession and a corresponding weakening of the world economic slowdown. As the present stage of China's indirect exports of steel products is much greater than direct exports, so taken together, a significant slowdown in the world economy for 2008, export of steel products, the actual impact may be more serious than we expected. All steel products exports (direct exports and indirect exports), converted into crude steel, in the worst case, more than 60 million tons more than last year reduced.
Reduction in exports, dragged down China's steel production release. Statistics show that the release of new capacity at the present stage of China's steel heavily dependent on international market demand. As mentioned above, only the 2007 National steel and billets directly reached 69.08 million tons exported, equivalent to nearly 80 million tons of crude steel, complete digestion of the same amount of crude steel have increased surplus. 2008, China's steel product exports directly and indirectly, a substantial decline in exports, new capacity is bound to drag on further release of the domestic iron and steel, which led to overcapacity in the steel situation to happen. The more reduced exports and domestic steel production capacity the greater the release of obstruction.
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