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Demand for Steel, Iron Ore to Grow Little Next Year, Institute Says

China’s demand for steel and iron ore will increase only slightly next year due to a real estate slowdown and less investment in infrastructure construction, a report from a government consulting group says.

The country will need 720 million tons of refined steel products next year, 1.41 percent more than this year, the report published on December 3 by China Metallurgical Industry Planning and Research Institute said. Some 834 million tons of crude steel will be needed, up 1.71 percent.

The country would use 715 million tons of refined steel products this year, about 3.2 percent more than last year, the institute said. It would use 820 million tons of crude steel, 5.26 percent more than in 2013.

The slight growth expected next year is the result of government measures including cuts to the lending and deposit rates to maintain economic growth, the report said. Despite this, the report predicted that next year’s GDP growth rate will be lower than this year’s.

The construction sector will need 395 million tons of steel products next year, 1.28 percent more than this year, the report said. The country will import around 1 billion tons of iron ore next year after importing 940 million tons this year.

Weak demand for iron ore has led prices to drop this year, given that China’s hunger for steel to build skyscrapers and other infrastructure has bolstered price increases over the past decade.

The price of iron ore is almost half of the peak of US$ 134.5 per ton seen at the beginning of the year. The price of 62 percent grade iron ore stood at US$ 69.5 per ton on December 3, according to the Platts Iron Ore Index, a benchmark for the spot price of physical iron ore.

The price will linger around US$ 70 per ton next year and will not be lower than US$ 60 per ton, said Li Xinchuang, the institute’s head. Even at this latter price the world four largest iron ore suppliers – Vale SA, Rio Tinto Group, BHP Billiton Ltd. and Fortescue Metals Group – can still make profits because the iron ore they ship to China costs around US$ 50 per ton, Li said.

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