Iron ore prices fell again on March 15, 2021 though paper was bid firmly overnight. Steel is holding:
Chinese port inventories climbed last week to nearly 131mt tonnes:
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If this continues it will provide marginal price support but steel margins will have to keep improving for it to do so.
The FT has some material on China’s new green crush:
“There is a growing expectation that the Ministry of Industry and Information Technology alongside the Ministry of Environmental Protection will announce new policy measures looking to stabilise emissions by the middle of this decade,” said Nicholas Snowdon, analyst at Goldman Sachs.
“As part of achieving that there is now an expectation that Beijing will introduce policies restraining blast furnace based steel production as well supporting scrap.”
In a sign of how seriously Beijing is taking the issue, an inspection team led by the Minister of Ecology and Environment visited China’s top steelmaking city Tangshan last week, according to MySteel Global, a Chinese price reporting agency, to check on supply curbs ordered by the local government under an emergency anti-pollution plan. Tangshan’s government has ordered heavy industry to limit or halt production during heavy polluted days so as to reduce emissions by 50 per cent, according to news reports.
“Tangshan’s current pollution emergency regime might be temporary, but the city also targets a cut to steel-related emissions by 40 per cent in 2021 and the government is working on a stricter steel capacity replacement plan, making continued headwinds to China’s steel output likely,” said Marius van Straaten, analyst at Morgan Stanley.
He estimates the blast furnace utilisation rate in Tangshan is down to 54 per cent, versus 76 per cent in late February.
“This translates roughly into 50m tonnes per annum or 5 per cent of China’s steel production being impacted.”
…“We now see iron ore prices turning lower in the coming months,” said Snowdon, who has set a 12-month price target of $100 a tonne.
“This reflects mounting evidence that supply is shifting toward a sustained recovery and also that China’s environmental policies will reinforce a peak in iron ore imports.”
Perhaps I should reevaluate. That’s more bearish on prices than I am!