The ferrous complex was firm on April 5, 2022 with Chinese markets reopening today:
I am still nervous about the durability of this rally given the building headwinds to global growth and passing seasonal tailwinds but Morgan Stanley is more bullish.
Marching on: Despite China’s Covid headwinds, iron ore is gradually moving higher – now >$160/t – mostly on supply constrains/disruptions, we think. Although downstream steel demand is under pressure and various steel mills are dealing with logistics challenges, China’s overall blast furnace utilisation rate has crept up by 10% to 85% (-3% yoy) since mid-Feb, supporting ore demand. While the market’s focus has been on energy and metals, disruptions to the iron ore export market from the Ukraine/Russia conflict are not insignificant, and amplify supply risks in an already constrained seaborne market. We remain bullish on iron ore from here, but see further price strength mostly geared towards 2H22, by when we expect China’s steel production to recover further.
