Never say never in markets.
The one relationship between macro and micro that used to be unbreakable was that of Chinese real estate and iron ore.
No more.
Chinese real estate sales are back. Booming in fact:
But the Three Red Lines policy has broken the link to starts as developers can’t leverage into the cycle:
For now, this construction weakness is being offset by infrastructure:
However, local government bond issuance was frontloaded this year, and debt stresses plus a lower quota means this will fade in H2.
No doubt real estate starts will rise from last year but not enough is still the base case.
The wider economy is not much chop, either. Energy and car consumption growth arw poor:
It is all adding up to lackluster demand for steel:
With a mighty trade shock looming from the US and then European recessions, iron ore does not look good into H2:
