* China spot steel prices dip 1 pct on week to one-year low
* Eyes on China Oct steel export data after dip from Aug peak
* BHP and Rio may reduce iron ore production to follow Vale
By Miyoung Kim
SEOUL, Nov 7 (Reuters) - Asian steel prices continued to fall this week to a one-year low, led by construction-use products, and are expected to fall further as the demand outlook dims and the credit crisis forces mills to cut inventories.
Even steep output cuts by the world’s biggest steelmakers and iron ore miners has done little to buoy prices, and analysts said more reductions are on the way as demand continues to decline.
“Prices are falling sharply in most steel products and it’s hard to see where it can stop,” said a trader in Seoul.
In China, the world’s largest steel producer, prices of benchmark hot-rolled coil dropped to a one-year low of $595 a tonne, down 1 percent on the week and 42 percent from a record high of $1,030 hit in July, data from Metal Bulletin shows.
Prices have fallen by nearly 30 percent in the past month alone as the outlook deteriorates sharply and producers dump inventories and reduce production across the globe on tight credit and tumbling orders.
Prices of billet, which is a semi-finished form of long steel and mainly used in construction projects, fell 25 percent to a three-month low of $645 a tonne for China free-on-board (FOB), as tightened credit market hit the building industry hard.
“Some billets are being offered but it wouldn’t surprise me to see material enter the warehouse soon....the premium is flat but we may start to see material delivered into South Korea, then we might start to see some differentials develop,” said a Singapore merchant.
In South Korea, Hyundai Steel (004020.KS), the country’s top construction steel supplier, cut prices for the first time in nearly three years, reducing rebar, also used in construction, by 9.8 percent to 921,000 won ($727) a tonne. [ID:nSEO303432]
“We forecast long steel (such as rebar) price will drop a further 40 percent in 2009...and the consumption and production cut of rebar in 2009 will be as deep as it was in 1998” during the Asian financial crisis, Citigroup analysts said in a report.
Confirming severe destruction in steel demand, the chief executive of Vale VALE5.SA (RIO.N) said the world’s top iron ore producer was unlikely to start term price negotiations with steel mills until normal demand for ore returns. [ID:nN06287810]
Many market participants now expect prices of both iron ore and coking coal to fall in 2009 for the first time since 2000, as the worst financial crisis in 80 years raised the prospect of a global, and potentially deep, recession.
The market will be also watching closely data next week that will show whether China’s steel exports rebounded in October to test the record high hit in August, as domestic demand from autos to construction weakened sharply as overall economic growth slwoed to the single digits.
A further fall in steel prices and production may also force mining giants BHP (BHP.AX) BLT.L and Rio Tinto (RIO.AX) (RIO.L) to follow Vale and cut iron ore supplies ahead of their annual term negotiation with Asian buyers as they seek to stabilise ore prices. ($1=1266.3 Won) ($1=6.822 Yuan) (Reporting by Miyoung Kim, additional reporting by Nicholas Trevethan)