Some nice charts via Vertical Group (which is an MB client in case you’re wondering):
While many have attributed the resilience in China’s steel prices this year to Xi Jinping’s “supply-side reform magic”, we believe a much more basic measure is at play. More specifically, we believe that as external pressures began growing last year, intensifying earlier this year (i.e., an escalating global trade war + US dollar appreciation + resumption of hot money outflows [Ex. 5]), China resorted to its old ways and unleashed its property market… yet again.
Consequently, given China’s property market is, by far, the most highly steel intensive segment of its economy (accounting for just over 53% of Chinese steel produced in 2017; the next biggest consumer of steel in China was the Machinery segment at just 15% of steel consumption – Ex. 6) it is no surprise that steel prices in China, and thus the world, have bucked the broad-based trend of falling bulk metals prices in 2018.
