Iron ore prices are yet to update. Dalian finished up 1.3%:
Rebar futures fell. The Baltic Dry capesize component was down as well some 2% and is back at its lows. Texture from Reuters:
“Steel mills are buying a bit more than last week, but prices for some transactions of port inventories have already dropped to below $100 a tonne as the stockpiles are too high,” said an iron ore trader in coastal Shandong province.
…:The market sentiment remains bearish as all the focus is on more and more supplies from overseas, and we don’t see any favourable factors coming soon,” said an iron ore trader in Beijing.:
My port stock measure hasn’t yet updated for last week so will report back on that. The always bullish Clyde Russel weighs in today:
The Chinese steel industry
says it has stopped expanding and is facing major problems amid a slowing economy.
Global iron ore miners are boosting seaborne supplies of the steelmaking ingredient by about 20 percent over the next two years and believe China will buy most of the extra cargoes.
It appears that both steelmakers and miners can’t be right, but as counterintuitive as it sounds, steel capacity can stop increasing even as iron ore imports experience robust growth.
…the Chinese steel industry still has close to another 200 million tonnes of capacity on top of that, meaning it could increase production substantially in the next few years without any additional investment.
…Whether the Chinese economy would need this much steel is debateable, given the slowdown in residential construction, which accounts for about a quarter of steel demand.
Most see realty absorbing between one third and one half of steel output. He goes on about supply increases:
The increase in supply begs the question as to whether the global miners and smaller competitors have got it wrong and China won’t be able to absorb the additional ore.
But the one key factor that may change everything is price.
Chinese domestic iron ore output meets about a quarter of the domestic steel industry’s requirements.
…Lastly, global miners need unfettered access to China’s iron ore market, and they must hope that the authorities are willing to see local mines close and reliance on imports increase.
Coulda, woulda, shoulda, if , maybe. Not much of an investment case if you ask me. There was only one winner during the supply shortage and there’ll only be one winner during the glut. A game of two halves, as it were.
