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updated: 9/27/2012 9:24 AM

China steel-mill closing curbs ship demand

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Bloomberg News

Baoshan Iron & Steel Co.'s suspension of some production will curb demand for imports of iron ore and ships that carry the commodity, according to Arctic Securities ASA.

China's largest listed steelmaker shuttered two unprofitable plants and processing facilities with a combined producing capacity of 3 million metric tons after demand fell for slabs used to make ships and bridges, Meng Haibiao, a media official at parent company Baosteel Group Corp., said by phone today. Steel output in China, the world leader, reached a seven- month low in August, according to Steel Market Intelligence.

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"The fact that Baosteel shuts down capacity is as a result of them losing money on the production," Erik Nikolai Stavseth, an analyst at Oslo-based investment bank Arctic, said by e-mail today. "Steel demand has not picked up yet and hence iron ore demand remains lackluster."

Steel usage slumped as economic growth in China slowed to the weakest since 2009 amid the European debt crisis and efforts to rein in the country's real-estate market. Hot-rolled steel coil, a benchmark product used in cars and appliances, dropped 9.1 percent this year to $629.17 a ton, according to data from Steel Business Briefing. Steel reinforcement-bar futures in Shanghai fell more than 20 percent in the first eight months of this year.

Fourth-quarter iron-ore swaps were unchanged today at $105 a ton, according to data from Clarkson Securities Ltd., a unit of the world's largest shipbroker. Prices for the steelmaking commodity with 62 percent iron content at the port of Tianjin dropped 25 percent this year to $104.20 a ton, according to The Steel Index Ltd.

Daily rates for Capesizes, the largest ships hauling iron ore, plunged 70 percent from the start of the year to $7,292, according to the Baltic Exchange, the London-based publisher of shipping costs. Forward freight agreements for the year's last three months are trading at $8,812.50, Clarkson data show.

--With assistance from Helen Yuan in Shanghai. Editors: Dan Weeks, John Deane.

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