Bluescope Steel Shares Slump as Iron Ore Price Falls

What happened to the Bluescope Steel price?

Shares of Bluescope Steel Ltd [ASX:BSL] lost 8.42% today.

Why did BSL shares fall?

The iron ore price has fallen to less than US$70 a tonne for the first time since November. The fall in value indicates less confidence in China, whose lower demand for steel could affect profits.

China’s Iron and Steel Industry (CISA) vice-president Li Xinchuang said during a conference in Perth that China’s steel industry had peaked, and it was transitioning to an ‘era of reduction’. According to The Australian Financial Review, the country’s demand for steel would drop 1.9% to 660 million tonnes this year.

A crackdown on housing finance is also likely to slow demand even further.

Share prices for the company fell from 12.35 to 11.285 today.

With 100 facilities in 17 countries, Bluescope Steel is a global leader in premium branded coated and painted steel products. The company operates in Australia, New Zealand, the US and Asia, primarily in the building, construction and automotive industries. 50% of its sales come from Australia.

What now for Bluescope Steel Ltd?

The company has been looking to broaden their scope of markets for hot-rolled and coated steel, but with an ugly outlook in the commodity market, this could prove difficult.

As AFR reports, analyst at Nanhua Futures Co Fan Qingtian told Dow Jones Newswires:

“We are seeing a correction in overly optimistic demand earlier this year”. [said analyst Nanhua Futures Co Fan Qingtian to Dow Jones Newswires]. That correction has wiped 28 per cent from iron ore’s February valuation high, officially taking it into bear market territory.

By Selva Freigedo

Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.

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