Iron ore prices for February 8, 2020:
The AFR muses on China’s greening:
Macquarie has modelled a scenario where China’s 7.7 per cent year-on-year production growth in December is sustained in the first quarter of 2021, then a trend slowdown of 1.5 per cent month on month takes hold through to the end of the year.
This would deliver positive year-on-year growth until July but then fall “precipitously”, ending with a year-on-year decline of 14 per cent in December for flat growth across the year.
While Macquarie labels this an “extreme, low-probability” scenario – given it would cause a spike in China’s domestic steel prices – it does ram home the risks to iron ore should Beijing be serious about a leaner and greener Chinese steel sector.
It won’t cause a spike in Chinese steel prices if demand slows at the same time. This is an accelerated scenario but add a few quarters and it is my base case.