The iron and steel industry climate will depend on raw material re-pricing in 2009

Brazil's Vale interrupted supply of iron ore in China, imbalanced supply and demand in the shipping market, and prices fell sharply

Brazil's Vale has stopped loading Chinese miners. This has led to a serious imbalance in the supply and demand of the global shipping market. The Baltic Shipping Index (BDI) reached its highest point on May 20 this year - 11,793 points. On October 31, the index fell to 851 points. The historical low of the BDI Index since 1995 is 776 points on January 18, 1999. Now the steel industry and its upstream and downstream industries are trapped in a positive feedback “hard landing” triggered by the outage of Brazilian mines.

High-priced raw material inventory will lead to short-term losses of steel companies

The large-scale state-owned enterprises whose international iron ore and seaborne prices are locked through long-term agreement prices have faced particularly severe challenges to the company's operating performance during the sharp fall in both iron ore and shipping prices. Therefore, in the fourth quarter of 2008 and the first quarter of 2009, we are relatively optimistic about the improvement in the performance of iron and steel companies with a higher proportion of spot iron ore and less shipping COA.

In November, domestic and foreign steel prices will bottom out

With the hard landing of international shipping prices and spot iron ore, international steel prices will follow the bottom. Domestic steel production has fallen sharply since September, and it is expected that the output in October will further shrink. After the dive of steel prices, the stocks in the downstream industries and circulation sectors are relatively small. Once the demand starts to pick up, the steel prices will bottom out.

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