But the main drivers of steel consumption are terrible. Housing starts are back in the dark ages:
In rolling annual terms, which might give us a better idea about the timing of commodity demand, they are down about halfway to where they will bottom so that can explain some of the demand gap:
The demand gap is not being filled by infrastructure. Cement is a great proxy on that and production there is terrible yet inventories are still climbing:
Given these two sectors account for at least half of Chinese steel demand, we’re looking at roughly a 10% drop in steel demand so far or roughly 130mt of steel.
So, where is the other 100mt going? Post-Ukraine exports can perhaps absorb a third of it. But the rest?
What we can say is that pig iron output (that is, blast furnace production) was at 80.5mt, its highest level ever:
That helps explain some of the pressure on iron ore prices despite the mystery of phantom Chinese steel.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
