China’s steel production and consumption has surged to record levels in recent months – supported by strong profitability for steel mills, points out Gerard Burg, Senior Economist at NAB.
“Steel prices have been elevated due to strong demand from the construction sector and speculative inflows into futures markets.”
“That said, Chinese authorities have ordered large scale capacity closures over the period from November to March (due largely to environmental concerns) – which is likely to have a major impact on demand for bulk commodities over the period. Weaker construction activity is expected to slow steel demand beyond this period.”
“Iron ore prices have retreated rapidly in recent weeks – dropping by 20% across September. This appears to be linked to Chinese steel mills cutting orders ahead of the capacity closures, along with speculative pressures in futures markets. We see the spot price trending around the US$60 a tonne mark across the next year, given ample supply in global markets.”
“Metallurgical coal prices are expected to ease from levels near US$200 a tonne over coming months, as weaker Chinese steel production impacts demand, heading down to US$100 a tonne by the end of 2018.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.