A couple of useful charts today from Morgan Stanley. Chinese mills have restocked iron ore to the highest levels since Q1:
But steel inventories are low and very low at traders:
Poor long product demand (used in building) is offsetting firm short product demand (used in cars etc) and the end result is low inventories. To see a turn in the market, property will need to bounce with enough vigour that the decline in the rate of construction growth reverses.
That will need six months of rising house prices. As we know, prices were still accelerating down in July, though the last few weeks have seen a lift in transaction volumes (if well below last year). From BofAML:
We are entering a seasonally strong sales period, however, so it’s difficult to judge at this stage whether the market has improved fundamentally. If housing were to turn then steel traders will need to restock product and mills to restock iron ore but at this stage the sales data is tenuous and any turn in prices likely to be slow and even slower for construction.
Dalian iron ore futures are down 1% today but the local miners are bucking the trend on the general rebound.
