The ferrous complex was very weak on August 18, 2021 with spot at new lows, paper falling further overnight and steel capitulating as well:
BHP upset the applecart:
Iron ore extended its rout as BHP Group warned it sees an increasing likelihood of “stern cuts” to China’s steel output this year.
The prospect of much lower steel production in the second-half is “testing the bullish resolve of the futures markets”, BHP wrote in a commodities outlook report on its website. Iron ore in Singapore has plunged by a third since spiking to an all-time high in May.
…While investor attention is very focused on China’s output curbs in the second half, the nation’s demand trends will also be critical. Beijing is pushing a range of measures to control the property sector, which accounts for big chunk of steel usage and has traditionally helped drive surges in iron ore prices.
“Policymakers are clearly concerned about over-investment and concentrated credit risk in the property sector,” Commonwealth Bank of Australia wrote in an emailed note. And even if China swings to more pro-growth policies to battle recent weakness, “there’s a good chance that the property sector is left out”.
Well, if that is the new normal, and I am quite unsure that it is (with a further post on this later this morning) then iron ore is on an express elevator to $20.
Apart from such uber-bearish speculations, I do think that we will be at $100 before Xmas as weak Chinese demand, combines with steel output cuts and rebounding supply to push us back to the highest cost marginal production.
- Australian dollar sinks as Evergrande drives greenback rally - September 20, 2021
- What is this “war with China” of which you speak, Mr White? - September 20, 2021
- More Evergande than you can possibly imagine - September 20, 2021