According to a French news outlet Radio France Internationale, China’s economic recovery is still struggling, as indicated by an oversupply in the iron market.
The iron ore price in the international market has now fallen to the level of 6 months ago, at the beginning of 2022.
China’s domestic iron ore price has also plunged for the past six months, and some Chinese steel mills reportedly cut output.
Reuters reported Benchmark 62% iron ore, monitoring spot price in China, was down 24% from 160 dollars in March to just over 120 dollars.
The main reason is the slowdown in China’s economic activities due to Covid control measures. The real estate sector, which accounts for nearly 40% of China’s steel consumption, dropped significantly. The situation was particularly bad in May when the price of steel bars for construction declined by 20% in the same month, and profits at local steel mills decreased.
The French outlet cited data from Bloomberg, saying China’s steel industry was too optimistic, increasing production as the Covid epidemic upsurged. According to industry data, daily production in April and May exceeded 3 million tons, while daily production in the first two months of the year was 2.5 million tons. Until June, the steel mills were still in full production. But now, some steel mills are beginning to take a break.
The price outlook for iron ore in the short run will depend on how China manages its zero-Covide policy. It also depends on how the regime’s package stimulus works, especially in housing, infrastructure construction, and automobile manufacturing.
Real estate plays a key role in the steel market. However, official China data shows that from January to May this year, China’s commercial housing sales area and sales volume fell by 23.6% and 31.5%, respectively. The new construction area of houses decreased by 30.6% in the first five months.