The worsening in Chinese demand conditions over the near term has sent iron ore prices into a tailspin, and the outlook for the rest of the year could be just as bleak. | Fin24
Iron ore tumbled almost 12% in Singapore before paring around half of the drop.
Li Gao, a director at the environment ministry, told a conference in Beijing on Saturday that China needs to put reasonable controls on steel output. In practice, that means cutting production for a second year, as per from the government last week. Factor in the move to less-polluting methods of producing the alloy and that could mean that iron ore consumption has peaked.
Weak demand from the construction sector has already led to a pile-up in steel inventory during what should be one of the year’s main periods of activity. What will worry bulls is that Beijing’s willingness to reverse that with massive spending on public works seems to be in doubt. In that vein, Capital Economics said in a note on Friday that it expects infrastructure stimulus to “merely provide a floor under prices as the government appears willing to tolerate slower growth in 2022.”In times of uncertainty you need journalism you can trust. For only, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
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