There has been surprising strength in China's
non -residential steel production. This may have been responsible for the slight increase, recently, in iron ore & met coal prices.
Will China's above trend net steel production increase? And will it boost iron ore & met coal prices?
discoveryalert.com.au J. Zaneh 16.5.25 said
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Iron ore has surged back above US$100/t, driving major mining stocks to their highest levels since early April 2025. This resurgence comes amid improving US-China trade relations and surprisingly robust Chinese steel production despite broader economic challenges in the world's largest steel producer.
...unexpected demand strength, creating a market dynamic that has caught many observers by surprise...Surprising Chinese Steel Demand Resilience
Despite persistent concerns about China's economic trajectory, steel production has shown remarkable resilience:
- Chinese steel production increased 1.1% year-over-year in Q1 2025
- Daily steel output reached 2.8 million tonnes in early May 2025, compared to 2.6 million tonnes in early January
- Steel inventories sit at just 11.6 million tonnes – the lowest level for this time of year since 2016
- The steel industry's Purchasing Managers Index in China remained in expansionary territory at 50.3 in April
"The steel sector is demonstrating impressive resilience despite property sector headwinds," notes Daniel Morgan, commodities analyst at UBS. "This resilience is primarily driven by infrastructure spending and manufacturing growth, which are offsetting weakness in construction."...
Bullish Perspective: ANZ Research
ANZ Research has recently adopted a more optimistic outlook for iron ore:
- Short-term price target raised to US$100/t from previous US$90/t
- Forecasts Chinese steel demand to grow for first time since 2020, reaching 998 million tonnes
- Notes that non-property steel demand now represents 72% of total Chinese consumption, up from 65% in 2021
- Fixed asset investment growth increased to 4.2% in March from 3.2% in December 2024
- Heavy industry sector investment (railways, shipbuilding) up 20% year-over-year in Q1 2025
Bearish Perspective: Westpac
Not all analysts share this optimism. Westpac maintains a more cautious outlook:
- Predicts [Iron Ore] prices falling below US$90/t in second half of 2025
- Cites Chinese steel companies forecasting "strong supply and weak demand" conditions
- Points to Simandou project in Guinea beginning production earlier than expected (November rather than December)...
Zadeh
- [China's} Property sector steel demand declined 8.3% year-over-year in Q1 2025
- Non-property steel demand now comprises 72% of total Chinese consumption
- Infrastructure steel demand increased 4.7% in Q1 2025
- Manufacturing sector steel consumption rose 3.2% in the same period
- Chinese government implementing 3.9 trillion yuan in economic support measures to offset property weakness
This structural shift represents a significant evolution in Chinese steel consumption patterns that many international observers have been slow to recognize.
Infrastructure Investment Surge
China's pivot toward infrastructure spending is creating substantial steel demand:
- Railway investment up 24.7% year-over-year in Q1 2025
- Water conservation projects investment increased 19.3%
- Energy infrastructure spending rose 15.8%
- Urban transit projects growing at 17.2%
"The scale of China's infrastructure push is difficult to overstate," notes Robin Griffin, Director of Steel and Raw Materials Research at Wood Mackenzie. "While property sector weakness garners headlines, the infrastructure buildout is quietly absorbing enormous quantities of steel."Iron Ore Back in Vogue as Prices Surge Above $100/t
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