The ferrous complex was strong on July 15, 2021 as Chinese data was received well. Spot jumped, paper more but steel has not updated:
The strength is being widely reported as resulting from weak Chinese data lifting hopes for stimulus. The opposite is true. The data was good and there is no more stimulus coming until growth gets worse.
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Still, demand is going to get worse. Chinese property completions are rocketing higher:
This is my pig in the python thesis playing out as COVID-delayed 2020 property and infrastructure starts were compressed into the second half of the year and spilled over into this one. More evidence that this is passing is found in steel production:
We have to adjust this a little for shutdowns related to the Beijing centenary but that’s not enough to fully explain it. Steel output growth has crashed from 16% a few months ago to zero today. That is unprecedented.
In short, Chinese demand is slipping. There will be more stimulus but not until it gets worse. Two major bottlenecks in Vale and RIO port loaders are resolved for a supply surge in H2.
There is some downside protection in low iron ore inventories and we’re still in a seasonally strong period, but the rest of the picture is increasingly weak.