China steel demand slumping at historic speed

Earlier today, the head of China's biggest steel organisation warned the country's steel mills could bow to pressure and make deeper cuts in output over the next few months, amid shrinking demand, soaring losses and tighter credit.

Iron-ore prices have sunk to their lowest level since July as concerns resurface about demand for the steelmaking ingredient from the world's No. 1 steelmaker, China.

Iron ore prices in China's domestic market are expected to fall further this week, Shanghai Metals Market foresees.

Ore with 62 per cent content for immediate delivery to China slumped three per cent to $49.95 this morning, according to Metal Bulletin. "September was the strongest month of the year of shipments from Australia and Brazil, so these exports have likely been making their way to China this month, adding to excess supply there".

Bayi Steel, a unit of China's second-largest steelmaker, the Baosteel Group 600019.SS , has already shut a production base that has an annual capacity of 3 million tonnes.

"While Sinosteel's potential default is reflective of the growing inefficiency of state-owned enterprises, it also points to slowing local demand as China continues its transformation into a consumption-based economy", Gallo said.

"The U.K.'s steel industry has been dealt a series of major blows in recent weeks and months".

Reining in excessive output is essential for addressing the oversupply issue, as it is unrealistic to hope that demand will increase under the current economic climate, Zhu Jimin, executive vice president of the CISA, was quoted as saying in a report posted on the CISA website on Wednesday.

Of course all these developments are negative for the global seaborne iron ore market.

Stockpiles of iron ore at ports in China, tracked as one gauge of demand, have increased to the highest since May. Indeed, iron ore prices dropped below $50 per ton for the first time since July this year.

The price of coking coal dropped 18% and metallurgical coke fell 20%, according to CISA.