Big China steel thrives, stoking export fears -1
Plunging iron ore prices are providing a lifeline for some of China's biggest steel mills, but raising the prospect of a rising tide of exports and increased friction with the European Union and countries such as India.
Even as China's domestic steel demand shrinks and the industry battles chronic overcapacity, lower iron ore prices have helped many large mills post better earnings in 2014 than a year earlier, supported by record exports.
That doesn't bode well for struggling steelmakers elsewhere in the world, which have been hoping for a shake-out of the industry in China, the world's top steel producer.
"(Cheaper ore) obviously encourages Chinese steelmakers to still produce because their costs are lower, and because of the overcapacity there's a strong incentive to still export," said Jeremy Platt, an analyst at London-based steel consultancy MEPS.
China boosted exports of the alloy by some 50 percent last year to a record 94 million tonnes, and western industry bodies see little sign of a major rationalisation of the industry.
The latest batch of Chinese steel earnings shows just three of 18 big mills to report so far suffered losses in 2014, down from five the year before. Six of the 13 profit-making mills in 2013 increased profits last year.
"Big Chinese integrated coastal mills are among the most competitive in the world as they have benefited the most from sharp falls in imported iron ore prices, helping them to gain growing market share both at home and abroad," said Zhao Chaoyue, an analyst with Merchant Futures in Guangzhou.
Seaborne iron ore prices tumbled 50 percent over the course of the year amid a push by mega iron ore miners to ramp up supply and win market share.