Chinese steelmakers are getting frustrated over the increasing prices of iron and even if Beijing wants to help in any way it can, not much can be done since China does not have adequate control of iron ore production operations.
According to Bloomberg, operating margins stood at around 5.3 percent as largely impacted by rising prices of scrap and coke. The figures indicate that steel mills with loads of debt are suffering from raw production losses.
During a conference on Friday, Vice Chairwoman of the China Iron & Steel Association (CISA), Qu Xiuli, called on Beijing to "maintain normal iron-ore market order." Qu further urged the Chinese government to do something about the prices that for many production plants, are unreasonable.
However, industry analysts said the Chinese government can't do much about the soaring prices even if it already pours efforts in helping curb losses. This is because China doesn't have adequate production plants for this particular product. Lack of production in the country further halts positive movements from the market.
Furthermore, doubling prices of iron ore were also affected by inadequate supply from exporting countries such as Brazil. Earlier this year, the Brazilian Brumadinho dam tragedy, as well as Cyclone Veronica's rampage in Australia's iron center, limited exports of the product.
It's not just a weak supply that affected rising iron ore prices. The auto sector also saw a decline over the last few months. Steelmakers in China highly rely on vehicle segments but sales have been slow, especially in February.
A global weakening in car purchases earlier this year wasn't good news for iron ore producers and steelmakers. It didn't help that world car sales were forecasted to shrink by over four million this year, further igniting fears among steel-making companies.
It's not just China's steel market that's been suffering through the ordeal. Many other countries experience the same issues regarding increasing prices and a decline in supply as tragedy-stricken iron ore regions are still in the recovery phase.
It is expected that the unity and voice of Chinese steelmaking firms will help stabilize prices as the government and related organizations look into opportunities that could help markets recover the losses they incurred over the past few months.
Tight supplies will still factor into goals of stabilizing iron ore prices but some industry experts believe that the global market and production sites will produce slightly better results now that there is more awareness regarding the problems that steel makers face amid hiking prices.
