Speaking at the 5th SteelOrbis Turkish Steel Market Conference held in Istanbul on November 26, Credit Suisse commodity analyst Melinda Moore drew a picture of steel mill-miner relations and discussed the future of seaborne raw material markets in relation to steelmaking.
Moore stressed the big change which the global steelmaking raw materials market has gone through during the year, with the transition from the annual benchmark pricing system to a quarterly benchmark pricing system, in which spot prices are the main reference.
Melinda Moore also emphasized that China is a gigantic spot market player, both in the raw material and finished steel product markets, exerting a huge impact on the overall system. The Credit Suisse analyst said that the system has changed mainly because the supply-demand chain could not cope with the growth of China as raw material supplies became stretched further in the annual system, adding that there is no chance of a return to annual price contracts.
As more large mills appeared on the steelmaking scene and arrived at the negotiating table for raw material prices, the situation became further complicated, Moore said, adding that, consequently, the era when a few mills negotiated with the three large iron ore miners is now over.
The Credit Suisse analyst said that China currently drives 60-70 percent of the seaborne iron ore market and will continue to do so, and gave her opinion that India will not become an importer of iron ore.
Pointing out that steel consumption per capita as a percentage of GDP will continue to increase in a growing China at least for the next 15 years, Moore said that the country will continue to constitute an environment for fixed asset investment.
She also claimed that, until 2015 China will continue to import scrap from the US - from where Turkey also imports scrap - with prices staying at high levels.
Looking at the creation of global iron ore supply, Moore said that the share of Australia is on the rise vis-à-vis Brazil, while India's share is decreasing and South Africa is slowly coming into the picture as a new player. She said that iron ore fines supplies will continue to fall short of demand, at least until 2015. She predicted that iron prices will stay over $100/mt at least for four more years. The Credit Suisse analyst stressed that the coking coal market also presents a similar picture, with high demand and low supplies.
Moore concluded that raw material price volatility will continue at least until 2015 as China continues to import high volumes of iron ore and scrap.