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The entire ferrous complex is in the process of buckling. Chinese steel futures are leading both coking coal and iron ore lower:
This is a combination of five factors:
- April seasonality is always weak. Do not underestimate the power of this.
- Major minors are puking ore again. Rio just printed its best Q1 output numbers, shipping 82.5mt. This positions it to deliver at the upper end or above volume guidance. FMG is mid-launch of 22mt Iron Bridge output. Vale had a soft Q1 for shipments but the output was very good. It is also positioned to meet or beat volume guidance.
- China is hammering away at speculators to prevent a bid in Dalian futures.
- The Chinese property market is not recovering in terms of starts. Although it will probably improve, developer funding is still very inhibited. This is as infrastructure funding falls away. Goldman offers some worrying texture:
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About the author
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.
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