May 21 2010
Frbiz.com, one of China's leading B2B search platforms, analyzes the decline in iron ore prices.
Frbiz analysis indicates that, through a series of control policies, China's property market has cooled significantly, touching a nerve in the steel industry. Last week, the national steel average price declined nearly 200 yuan/ton.
The fall in steel prices transferred immediately over to the iron ore market. Iron ore prices have fallen slightly for three weeks, with the price of iron ore this week down 1.4 percent.
Frbiz predicts that international iron ore prices may continue to fall. The fall in steel prices also has an impact on the automobile industry. Among them, the impact on low-cost small cars is most.
Beijing Municipal Bureau of Statistics recently released the latest data that shows the Beijing property market registering a dramatic drop in trading volume in April. From Jan-April, the city's sales of commercial housing were 5.229 million square meters, down year-on-year by 3.5%. There were 1.187 million square meters of commercial housing sold in April this year -- a drop of 41%.
In other first-tier cities, property turnover has also dropped dramatically, with some cities' property market turnover volume dropping 6 percent.
Frbiz believes that a reduction in domestic demand is the main reason for the drop in steel prices. The tightening real estate policy will not only slow down the pace of expansion of real estate, but will undoubtedly lead to market volatility and accelerate the price decline.
With steel prices, steel mills have to consider the cost of procurement of iron ore. Purchasers on the sidelines will obviously wait for prices to fall after the order. Some iron ore traders are more worried about the adjustment of steel prices, to speed up shipping rates.
Frbiz reports that the decline in iron ore prices over the next few weeks may reach 30%.