The New Year is here and the speculative fest that is the iron ore complex continues to deliver, although the Tianjin spot price did waver over the Christmas break, falling more than 3% to be at its lowest since mid December:
It has to be remembered that the most active iron ore futures on the DCE (Dalian Commodity Exchange) gained nearly 40% in the last quarter of 2020, having leapt more than 20% in December itself. Is 2021 going to be a repeat? Perhaps not if calls for the steel sector to make drastic cuts in crude steel output are heard. Via Reuters:
The Ministry of Industry and Information Technology called on the steel sector to “resolutely” cut crude steel output and ensure an annual drop in 2021.
As the world’s largest producer of steel at 1.1 billion tonnes in 2020, China has shut down 150 million tonnes of annual production capacity from 2016-2020.
“Output cut can further improve the steel sector’s supply and demand situation… break and ease issues of deformed profits due to high raw material prices,” CITIC Securities told Reuters.
Reasonable control of steel production can safeguard profit margins of mills and prevent high prices from getting transferred to the downstream sectors, CITIC added.
President Xi Jinping announced in September that China plans to go carbon-neutral by 2060. The country is the world’s largest energy consumer and greenhouse gas emitter, it mines and burns half the world’s coal, and is the top importer of oil and natural gas.
Transitioning the Chinese economy to carbon-neutrality within a few decades could cost $5.5-trillion, Sanford C. Bernstein & Co estimates.
Wait and see on that resolution….