Signs point towards tightness easing in the iron ore market – ANZ

June’s better-than-expected economic data from China are unlikely to allay fears of fading growth momentum. And this could increase downward pressure on iron ore prices. Still, strategists at ANZ Bank do not see a sharp correction in the short-term because the market is still tight.

Growth in China’s steel output starting to fall

“Chinese steel demand started the year strongly, with production volumes in January-May up 13% YoY. But momentum has started to turn. Auto sales fell in June. Infrastructure investment has been contracting YoY, and property sector growth has softened in recent months. Chinese steel margins have dropped sharply, which has led to June recording the first monthly decline in steel production since November 2020.”

“Demand outside China is expected to offset some of that weakness there. And subdued growth in supply should keep the iron market relatively tight. Prices should trend lower in H2 2021, but the downside will be limited. We maintain our 0–3-month target of $185/t.”