A few charts from Morgan Stanley today nicely illustrate Chinese steel woes. First, apparent consumption:
Apparent consumption is a measure of steel consumption without incorporating changes in inventories, thus it is a good guide to demand, which is falling.
There are two reasons why, one cyclical the other structural. The former is the result of the shakeout brought on by policy with steel traders being forced out in droves, thus steel inventory cycles are being smashed:
The second reason is the structural shift away from building as the driver of the economy, which is simply calamitous for the sector:
If construction even eases, let alone corrects, then the only way for steel production is down.
Better snap up those cheap iron ore miners, not.
