Here's the result of collapsing prices in China, themselves result of weak demand: China's rising steel exports slam Asian producers
Europe used to soak up most of China's steel exports, but the region's protracted debt woes have forced producers like Baoshan Iron & Steel to turn their shipments to destinations closer to home. The wave of cheap Chinese exports has fuelled price undercutting among Asia's top mills, which are expected to report profit slumps for the three months to June.That's one heck of a swing to hit the market. Chinese speculators have accumulated copper, nickel, coal and other commodities, what's going to happen in those markets if China starts exporting those hoards?
POSCO, backed by billionaire investor Warren Buffett, is expected to see its operating profit fall by a third from a year ago, analysts say.
"Before, China was exporting 2 million tonnes per month and now it is suddenly 5 million tonnes. Given that domestic demand in their respective countries is already not particularly strong, they (local steel producers) are clearly afraid," said Helen Lau, a commodities analyst at UOB-Kay Hian in Hong Kong.
China's Baosteel cuts main steel product prices for August
Baosteel's pricing decisions are generally regarded as a bellwether for the industry. While demand generally weakens in China's hot summer months as construction projects slow, sluggish economic growth and a fragile global economy are putting particular pressure on the company this year.That drop off at the start of the chart above came as the real estate market felt its first chills. If the expected pickup doesn't arrive, prices will crumble.
China's steel industry is expected to see low demand in July and August until a seasonal pickup in September, and expectations of more efforts by Beijing to boost the economy are unlikely to provide an immediate boost to steel prices, analysts say.
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