The ferrous complex was mixed on August 13, 2021 as spot fell, paper firmed overnight and steel was stable:
As interesting as these daily numbers are, the real story is elsewhere today. CISA released its steel output data for early August and it is stunning, crashing below comparable 2019 levels:
Moreover, steel inventories climbed over the period and prices fell. Chinese underlying demand is crashing as the catch-up growth “pig in the python” passes.
On Friday Bloomberg reported that China plans to cut steel output by 61mt in tonnes H2, which equates to 100mt of iron ore not needed versus last year. If the last ten days of CISA output is continued it will be 90mt and 150mt of iron ore that is not needed.
The last time Chinese steel output was at these levels there was materially less iron ore supply and it was trading at $93. RIO was at $90 and FMG was at $9.
Without a sudden and dramatic change in Chinese policy, that is where we are going with a bullet.
