From Citi’s excellent Ivan Szpakowski who sees iron ore at $40 by March, via the AFR
“We’ve had a massive slowdown in demand growth – both structural and cyclical – in the commodities space, and the question about the transition away from heavy industry remains how much along we actually are. If you look at steel demand and you look at diesel demand – these are the two largest industrial commodities in China – growth for both of those has been negative this year. You can add coal to that as a third major one. So, clearly, you already seeing a significant shift taking place.
Chinese steel mills, despite losing money, have maintained production in order to maintain credit lines with the banks, which often assess debt-servicing ability based on operating rates. There has also been a desire by the steel producers to try to hold on longer than the competition, to outlast them in the hope that they would cut production. But there’s only so long that they’re going to be able to operate, that their balance sheets will hold with negative margins.”
About right.
