Iron ore Dilemma Will China Actually Cut Steel Output?

0
115

Chinas vast steel sector, and the iron ore industry feeding it, is grappling with a seemingly contradictory policy impulse that it should produce less this year, even as demand remains strong amid postpandemic stimulus spending.

China produced a record 1.05 billion tonnes of steel in 2020, helping to drive spot iron ore prices to a oneyear peak of 175.40 a tonne on Dec. 21. Over the year, prices rose 75.

The spot price of benchmark 62 iron ore delivered to North China, as assessed by price reporting agency Argus, has since retreated back below 160 a tonne.

But the price has been above 150 for almost two months, which is a strong performance considering that the steelmaking ingredient held below 100 for the five years between May 2014 and May 2019.

While Chinas record steel output has played its role, global iron ore supply has also been hit by a series of issues in secondlargest exporter Brazil, which has suffered disruptions from the coronavirus pandemic, mine closures on safety grounds and a fire last month at an export terminal.

Top exporter Australia has managed to keep its shipments at robust levels, but this hasnt been enough to offset the supply losses from Brazil and still meet Chinas demand.

The question for market participants is whether China will really curtail steel production in 2021, or whether ongoing stimulus spending will triumph as authorities prioritise economic growth over pollution and energy consumption concerns.

The official line is that…

LEAVE A REPLY

Please enter your comment!
Please enter your name here