The ferrous complex was smashed on October 21, 2021 as paper crashed taking spot with it:
The calculus at this point is simple:
- Chinese demand is crashing and it is not in the mood to stop it. Steel output is already down an unprecedented 25% from the peak in May. By calender year, it will be about a 15% fall for 2022 at this stage.
- This equates to 350mt less iron ore from the peak. Or about 250mt on the calendar year. Add another 50mt of new supply.
- The short-term coal bubble is bursting and as it does all 120mt of suspended EAF steel output in China will return, foisting the full weight of the above adjustment onto iron ore and coking coal.
- In my 20 years of covering this market, I have never seen a more disastrous setup for prices. The GFC does not come close given this time it is structural.
