Iron ore’s last hope fades

Chinese property was slightly less apocalyptic last week:

However, the trend is set in stone in mortgages:

The outstanding amount of individual mortgages fell to 38.6 trillion yuan ($5.4 trillion) at the end of June, down 260 billion yuan from the same period a year earlier, according to data from the People’s Bank of China released Friday. That’s the first year-on-year drop in the data going back to 2011.

It keeps getting worse for property developer funding:

Infrastructure funding is not lifting:

MySteel measures remain terrible:

The greatest hope for iron ore in last week’s stimulus announcement was the possibility for a rerun of the 2015 shantytown redevelopment funded by QE. Mizuho hoses that idea:

…despite the efforts of high-level policymakers to promote the renovation of urban villages in 21 megacities, the impact of this initiative is expected to be considerably less significant compared to the renovation of shanty towns nationwide during 2015 to 2017 (Fig6). The costs associated with acquiring and developing land in these megacities are expected to be substantial. However, the Chinese state council is encouraging a diverse range of funding sources, from private capital to local SoEs, as opposed to relying primarily on pledged supplementary lending (PSL) issued by national policy banks in the previous round. Given the current financial circumstances of local governments, LGFVs, and private property developers, it is likely that the progress of this new round of renovation will be relatively lagged compared to the previous one.

China is out of bullets for construction, and its headline growth will keep slowing to boot.

As for steel and iron ore, the risk now is output cuts:

Steel mills in China’s southwestern Yunnan province have been asked to prepare to cut back production to meet a government mandate on capping 2023 output at last year’s level, two Chinese consultancies said on Friday.

The orders, reported by Shanghai-based consultancies MySteel and Fubao, follow similar instructions issued to mills elsewhere earlier this week, weighing on iron ore prices.

…Yunnan accounts for around just 2% of China’s steel production but analysts said the news reinforced sentiment that a nationwide production cut was looming.

That was enough to trigger decent falls on Friday in Dalian futures:

Bigger falls ahead in Q3/4 is still my view.