The ferrous complex is buckling.
Steel output cuts are so far insufficient to lift steel prices. Iron must fall much further if steel mill margins are to be restored.
Weekly data from consultancy firm Mysteel showed that fewer than 40% of the 247 surveyed steel mills were profitable, a level last seen in October 2024. Both blast furnace capacity utilization and average daily output declined slightly from the prior week, indicating a pullback in production.
Chinese trade data for October decelerated meaningfully and nicely illustrated a major downdraft for prices.
The steel export pressure release valve has closed as tariffs bite. October exports fell 3% year on year, and the growth trend is obvious.
The longer view.
Chinese iron ore imports are still booming, but this is partly higher quantities of lower quality ore to offset weak margins.
The long view.
As Simandou starts up, lower-quality ore will be substituted with higher-quality ore, and volumes will suffer more than underlying steel dynamics.
There is too much more iron ore already, as it piles at ports very fast.
By ignoring the obvious for months, and with no stimmies in sight, the market has created a bit of a perfect storm for iron ore prices here, despite Q4 seasonal tailwinds.
