Iron ore charts for September 13, 2016:
Tianjin benchmark was smacked 2.3% to $56.20. Paper was stable overnight after yesterday’s drop. Steel topped and falling. And all of that after good Chinese data. We are just clearing our throats here before the scream. The way this usually works is we we weaken steadily then roll into capitulation. Lower prices ahead.
Texture from Reuters:
Chinese steel futures stretched losses to a seven-week low on Tuesday on worries over demand in the world’s top producer, dragging down prices of raw material iron ore.
Concerns over a slow recovery in demand after the summer construction lull amid steady supplies of steel have raised concerns that prices could come under further pressure.
“The rise in August was driven by expectations that demand would pick up in September but the reality is we haven’t seen any boost in buying for now,” said Xia Junyan, an investment manager of Hangzhou CIEC Trading Co in Shanghai.
China has made increased efforts to cut steel overcapacity, toughening its stance in an environmental crackdown and shutting many smaller mills. However, analysts expect the government will work to meet its annual target, but won’t exceed it.
“The production interruptions lifted sentiment earlier, and now the market does not have any stories to trade,” Xia said.
That may be the leading edge of the construction slowdown I’ve been expecting since credit pulled up in May. Steel output was good in August:
But clearly it is going to slow further. With output now -1% year to date on NBS figures, ending the year flat seems a good bet, though CISA output is still -3% year to date:
It’s been a year of disruptions for steel so perhaps that explains it.
