With profit margins having improved, and the “golden season” for construction ahead in September and October, steel industry participants are increasingly positive on the near term outlook for the market, with traders consequently planning to lift inventory, and mills to lift production and restocking of raw materials at the same time.
However, while expectations are high for a near-term demand improvement, we remain concerned that currently elevated steel and iron ore prices are already factoring these in, and we remain negative on the outlook for prices from here. Discussions with industry players on our recent China trip were incrementally more pessimistic looking beyond the golden season: latest Chinese macro data was clearly not supportive, housing markets look like finally cooling, and expectations of further stimulus were more subdued.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
