Jun 5 2010
Frbiz.com, one of China's leading B2B search platforms, analyzes iron ore prices soar reasons.
Frbiz reports that this year iron ore prices are soaring, Frbiz's analysis indicates that based on a comparison with the same period last year, from January to April, steel prices were relatively low due to the global financial crisis, and at that time 77 steel enterprises in China's iron and steel industry lost RMB 4 billion, while in April of last year, domestic steel prices began stabilizing and recovering.
Four months ago, steel enterprises' profitability showed a significant increase, because last year iron ore prices were relatively low, so Chinese steel enterprises stored a lot of iron ores. Although this year iron ore prices are soaring again, Chinese steel enterprises are still mainly using iron ore inventories.
The figures show that in the first four months of this year, prices of imported iron ores increased 26% year-on-year, while during the same period of time, the production costs of medium-sized steel enterprises increased by 15%. This shows that the first four months of the year, actual consumption of steel was mainly of last year's low-priced stocks. After the first quarter of this year, iron ore prices will rise as cheap imports of ore consumption are exhausted.
Due to rising costs, the profitability of China's steel enterprises will be severely affected, and some companies may fall into debt.
Frbiz analyzes that iron ore price rises have led to increased steel prices and compressed steel manufacturers' profits. More importantly, raw materials prices have increased greatly, further reinforcing the global inflation.