The ferrous complex blasted off on Tuesday 6, April as Chinese steel output restrictions backfire spectacularly in the form of skyrocketing prices. Iron ore spot and paper followed:
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Ah…those central planners. They never learn. As noted many times previously, when you mess with steel output to try to sink iron ore it nearly always goes the other way.
So, where does this leave us? I expected strong pricing through April so there is no change to the outlook in this yet. But the higher steel goes the greater the risk iron ore spikes with it before it comes down, so average prices are better for now.
May should still be very weak as southern Chinese rains stall construction demand for steel. Beyond that, I expect firm prices again in Q2.
With these self-defeating steel output caps in place, we may need to see genuine fundamental weakness in demand before the market really cracks lower in H2.