Iron ore price lifted by strong Chinese steel growth

Iron ore price lifted by strong Chinese steel growthBuild it and they will come…

Global steel production rose 6.6% in October compared to output a year ago, with China again setting the pace for overall output, World Steel Association data showed on Wednesday.

Steel production is a key indicator of activity in global industry and iron ore, the key steelmaking ingredient, is the second most traded commodity around the world behind crude oil.

China, which produces almost as much steel as the rest of the world combined, recorded growth of 9.2% in October to 65.1 million tonnes compared to last year, while global number two Japan's production was up 7.7% to 9.5 million tonnes.

World Steel Association data also showed healthy growth outside Asia with US production jumping 8.7% to 7.4 million tonnes, and in the European Union, production was up 4%, led by a surprising 23.9% output boost in Spain and a 17.9% increase in Britain.

China's Iron and Steel Association released data yesterday that the country's daily crude steel output for the firs 10 days of November rose a further 2.18% from the already torrid pace of late October.

The daily run rate for Chinese blast furnaces are now 2.144 million tonnes and the increase in output follows a rally in steel prices prompted by reforms announced at the Chinese Congress' so-called Third Plenum policy meetings.

Amid other market-friendly reforms, the liberalization of China’s hukou system is expected to be a main driver of a fresh wave of urbanization inside the country of 1.3 billion people.

Under China's 4,000 year old hukou system, you are registered in your town of birth and can only access government services including education, housing and welfare there.

This had the effect that among the 240 million migrant workers in China, even white-collar professionals in say, Shanghai and Beijing were not afforded permanent residence in the city and could not buy a home.

This lead to millions of migrant labourers and especially their children in large cities becoming an underclass without ways to put down roots.

The strength in the global steel industry has offset some of the price pressures brought on by increased supply of the main raw materials for blast furnaces.

The price of iron ore has held up well despite record-setting exports from Australia and a looming flood of new supply through 2017.

The benchmark CFR import price of 62% iron ore fines at China's Tianjin climbed to $136.40 a tonne on Wednesday, up 23% from its lows for the year struck at the end of May according to data provided by SteelIndex.

The price of metallurgical coal has recovered from steep declines during the first half of 2013 but remains relatively soft.

Benchmark Australian premium coking coal was changing hands for $143.00 a tonne on Wednesday, up from multi-year lows of $131 at tonne struck in early July, but down 2.5% so far in November.

Image of Hong Kong construction workers on bamboo scaffolding 18 floors up by ttstam on Fotopedia