One the one hand, strong demand resulting from infrastructure construction projects boosted by Beijing stimulus, and on the other, weaker global demand due to the Coronavirus shutdown at home and abroad...
Iron ore prices fell Monday as data out of China showed that fewer blast furnaces at mills were put into production last week. Capacity utilisation rates at 247 mills across China fell to 91.54% from 92.35%, whilst portside inventories of iron ore rose for the first time in 10 weeks. Shipments from countries like Australia into China continue to rise which may add to further downward price pressure in the short term.
Chinese demand for steel is dichotomous at the moment. To offset lower global demand China's policymakers have unveiled stimulus measures such as large infrastructure projects aimed at reviving the key construction industry. As a result, construction materials have been in high demand as demonstrated by falling inventories, and therefore leading to rising prices of rebar.
On the other hand, demand for flat steel, used for building steel-heavy items such as automobiles, industrial machines and whitegoods, has been stymied by the shut down in factories and reduced global demand resulting from the Coronavirus pandemic. Sales of autos and machines are down 16.9% to the end of May, and home appliance exports are down 9.1%.
If the recent trend of lower inventories and higher prices for iron ore is to continue, one source of Chinese demand for the commodity will have to catch up to the other.
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