OneSteel Ltd. (OST), Australia’s second- largest producer, said iron-ore prices will further rise next year as inventories in China remain low and demand for the raw material used in steelmaking recovers.
“The fundamentals for strong demand from China remain sound, and we have been encouraged with the recovery in iron-ore prices from their recent lows over the last few weeks,” Chairman Peter Smedley said at the company’s annual shareholders’ meeting in Sydney today.
OneSteel is relying more on iron-ore sales as the Sydney- based company and bigger rival BlueScope Steel Ltd. (BSL) slash jobs to battle higher production costs and lower selling prices of steel in the domestic market. OneSteel Chief Executive Officer Geoff Plummer said today he won’t rule out shutting the main Whyalla steel plant in South Australia should the company fail to improve performance using other measures.
Iron-ore prices have stabilized and are recovering from “rock-bottom” levels earlier this year, Vale SA (VALE3), the world’s largest producer of the steelmaking ore, said Nov. 8. Prices for immediate delivery gained 24 percent this month in China after tumbling 31 percent in October, according to The Steel Index Ltd.
OneSteel fell 3.6 percent to 93 Australian cents at the close of Sydney trading today, while BlueScope dropped 6.2 percent to 61 cents. OneSteel has declined 5.6 percent since Nov. 2 when the company cut its estimate for first-half profit after iron-ore prices slumped and the Australian dollar strengthened.
Net income in the six months ending Dec. 31, excluding one- time charges for an acquisition, will be in the range of A$55 million ($55 million) to A$75 million, OneSteel said Nov. 2 in a statement. First-half profit last year was A$116 million.
“In Australian steel, we are currently not seeing any improvement,” Smedley said. “We are expecting conditions to remain challenging for these businesses over the remainder of the financial year.”
BlueScope shut a mill and a blast furnace to cut exports as well as shed about 1,000 jobs after turning to a loss in the six months ended June 30, the company said in August.
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