SHANGHAI, Oct. 27 (SMM) -- At present, prices of iron ore (Fe 66%, wet basis, including tax) fell by RMB 350/mt to RMB 810/mt in Tangshan, Hebei province. Although some mines still have profits as high as RMB 300/mt after iron ore price slump, profits margin has narrowed to great extent compared to previous days. As for mines producing coarse powder, profit margins were even narrower. At present, prices of coarse powder (Fe 62%, wet basis, excluding tax) were only RMB 560/mt, while production costs for coarse powder were as high as RMB 500/mt. According to some coarse powder mines, as stock replenishment for winter production almost came to an end, downstream purchasers may further cut procurement prices. If fines prices fell below RMB 500/mt, they would consider cutting production.
According to an official from a mine in Liaoning province, diesel shortage pushed up diesel prices in that region. Considering iron ore price cut and raw material price hike, some mines may plan to halt production at strip mine but may not halt production at beneficiation plant.
Apart from production halt plan, some mines planned to conduct unit maintenance in advance in October, any would resume production in November. However, according to some mines, if iron ore prices continued to fall, they would consider resuming production early next year.
Steelease believes that large scale production halt like that in 2008 will not likely occur in the short term, as current profits are still as high as RMB 20-300/mt. If iron ore prices fall further, some mines with high production costs may choose to halt production. At present, independent beneficiation plants almost have halted production completely, while iron ore traders also have halted production.