The ferrous complex was strong on November 22, 2021 as spot jumped with paper but steel fell back:
There’s much excitement about more Chinese stimulus but that’s just the usual Pavlovian dogs. At this juncture, there is nothing coming that fundamentally alters the oversupply of iron ore.
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What matters more is thermal coal prices. They were up a little in China and in seaborne futures yesterday but that is very short term:
China’s daily coal output has stabilised at 12 million tonnes, amid a raft of measures to ramp up power production, the country’s state planner said on Sunday.
Beijing has been trying to cool a red-hot market for coal, China’s main fuel for power generation, after shortages led to electricity rationing for industry in many regions, adding to factory gate inflation in the world’s second-biggest economy.
Coal stocks at ports and power plants have been picking up quickly, with stocks in power plants hitting 129 million tonnes as of Nov. 14 and expected to hit 140 million tonnes by the end of November, said state media CCTV.
“Energy prices including coal prices have fallen significantly lately,” the report said, citing National Development and Reform Commission (NDRC) official Zhu Xiaohai.
The fall in coal prices has pushed down prices for steel, aluminium, pulp, PVC and coal chemical products, and pricing pressure on those raw materials has eased, Zhu, a deputy director of NDRC’s Department of Prices, said in the report, which the commission reposted.
Some charts from Goldman:
As power output and prices normalise, the 120mt of steel scrap recycling currently offline in China will resume production and, at that point, 200mt of iron ore and 100mt of coking coal will no longer be needed:
Nothing policymakers are doing suggests stimulus large enough to prevent this.