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Why the Long-Term Outlook on Iron Ore Prices Is Still Negative (Continued from Prior Part) China crude steel
China accounts for about half of global steel production and is the world’s biggest buyer of seaborne iron ore. Iron ore is the main ingredient in steel manufacturing, and China is the largest producer and consumer of the two commodities.
China’s steel output increased month-over-month by 1.7% to 66.9 million tons. However, the production declined by 3.5% on a year-over-year (or YoY) basis. For the first eight months of the year, the production dropped by 2% to 543 million tons over the same period last year.
Part of the YoY decline is due to the shutdown of some mills in and around the Hebei province to ensure quality air for the military parade to commemorate the World War II anniversary.
Outlook remains negative
According to the China Iron and Steel Association (or CISA), China’s crude steel output could decline by as much as 2% in 2015. This estimate is lower than CISA’s March estimate of a decline of 1.1%. Weaker construction and manufacturing demand are weighing on steel prices, which is leading to lower steel production.
A decrease in China’s crude steel production would impact the iron ore miners engaged in seaborne iron ore trade such as BHP Billiton (BHP) (BBL), Rio Tinto (RIO), Vale SA (VALE), Fortescue Metals Group (FSUGY), and Cliffs Natural Resources (CLF). A production decrease would also affect the iShares MSCI Global Metals & Mining Producers ETF (PICK). All listings of BHP, RIO, VALE, and FSUGY form 34.1% of PICK’s holdings.
To take a broader approach toward investing in the steel sector, consider the SPDR S&P Metals and Mining ETF (XME). Cliffs Natural Resources (CLF) makes up 3.8% of XME’s holdings.
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CLIFFS Natural Resources
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PRODUCER |
CODE : CLF |
ISIN : US18683K1016 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
CLIFFS Natural Res is a iron producing company based in United states of america. CLIFFS Natural Res produces iron, coal in Australia, in Brazil and in Canada, and holds various exploration projects in Canada. Its main assets in production are WABUSH MINE, EMPIRE AND TILDEN MINES, HIBBING TACONITE, NORTHSHORE MINE, UNITED TACONITE, OAK GROVE MINE, GREEN RIDGE MINE and PINNACLE MINE in Canada, AUSTRALIAN IRON ORE and SONOMA in Australia and AMAPA in Brazil and its main exploration properties are MT JACKSON J1 in Australia and DIAGNOS, WAWA, FREEWEST, MC FAULD'S LAKE, MACFADYEN, WAWA CLAIMS and BIG DADDY in Canada. CLIFFS Natural Res is listed in France, in Germany and in United States of America. Its market capitalisation is US$ 5.4 billions as of today (€ 5.1 billions). Its stock quote reached its highest recent level on May 16, 2008 at US$ 99.17, and its lowest recent point on January 15, 2016 at US$ 1.20. CLIFFS Natural Res has 297 400 968 shares outstanding. |