The ferrous complex was half-hammered on Thursday 22, 2021 as iron ore gave way, paper kept falling overnight but steel jumped again:
The same explanation is on offer from Reuters:
Chinese iron ore futures fell for a fourth consecutive session, down more than 7% to their lowest levels in nearly three weeks, on prospects of more imports of the steelmaking ingredient and as demand eased on the government’s decision to cut production.
“The government has a relatively strong determination to control steel output this year, which could affect demand for raw materials,” Li Wentao, an analyst with Tianfeng Futures, said.
Perhaps the nexus between higher steel and iron ore prices has finally been broken. Certainly, this price action is very unusual in seasonal terms for iron ore:
There are some other possible factors. The Henan floods, and generally bad wet season, will be playing a role in suppressing demand. That said, Henan steel output is not overly big at around 30mt.
Then there are the death throes of Evergrande which may be starting to weigh on downstream sentiment.
Or, this is just the beginning of the end that I have been forecasting since January.
I’m not the only one…