Rebar futures were OK yesterday, but the iron ore bubble popped a little in late futures trading:
Especially in wildly overshot Dalian futures:
Coking coal looks ready for a downside test:
Market scuttlebutt is bearish as China International Capital Corporation (CICC) stated in a report that although “the issuance of local government bonds has sped up and this will likely provide some support for rebar consumption later, we still lowered forecast of the annual infrastructure investment growth rate to 6%-8% from 10%.”
According to a separate note from CICC analysts, the recent property stimulus will likely not increase steel consumption directly because it is mostly focused on destocking. The property sector will continue to be a drag on total steel demand.
As well, a little more slipped out about Simandou, the Pilbara killer.
RIO’s man on the ground in Guinea, Samuel Gahigi, stated that since Chinese businesses had a larger combined share in the two mining sites at Simandou, half or more of the iron ore might be transported to China, which is the world’s largest consumer of iron ore and producer of steel.
“It is also part of China’s race to decarbonisation,” he stated.
Prior to Simandou’s launch, Liz Gao, a senior analyst at commodities consulting firm CRU Group, predicted that while Brazil and Australia would continue to hold a leading position in the market, Simandou will probably displace some of their iron ore shipments to China.
I will add that because China is the marginal cost buyer and price setter, Simandou would also have an exaggerated impact on iron ore pricing globally.
Last month, Macquarie forecast an iron ore price in $60s range on these effects.
Given the Pilbara killer’s overlap with declining Chinese demographics and urbanisation running about 1%, I see this as conservative:
