China in the last few weeks has witnessed Covid cases in a few major cities and as a result the government of China has shut down many cities to do testing for its citizens as part of its zero-tolerance to Covid. I am sure any people have heard of China shutting down the whole city of Wuhan to do testing for its total population of more than 11mil people while banning all rail and air traffic into Beijing. Think about it. These major cities all of a sudden stop all building activities and of course the massive impact on the demand for steel and iron ore. But these measures are very short term and they are now back to normal building activities now.
Vietnam, Thailand, Malaysia, Burma, Phillipine, Indonesia, India, Japan,...jave basically come to a stand-still. Just think of VN for example. 100mil people economy with breakneck building activities all over the country are literally on hold right now to help the government deal with the current rampant surging Covid cases. This country is behind the world at least 50 years in term of infrastructure and high rise housing and only just started to build crazily everywhere you go and now all its citizens are ordered to stayed at home. So, again its steel production, consumption are basically at close to zero for the last 2 months and remain so for at least for the next few weeks. But when it get through this terrible Covid wave, it will be back to its break-neck building activities and steel consumption, steel production and iron ore demand will snap back to crazy level.
That is VN. Think of Indonesia (270mil population), Japan (135mil population), Thailand (70mil pop), India (1.4bil pop), Phillipine (100mil pop),...You can now figure out how much impact Covid has had on building activities and steel demand but when they are back to normal life, their steel demand will be back to massive level. These countries are almost twice the population of China. And in these countries, for example VN, their building activities are at least 2 times the level of building activities in China per each million population. Anyone has gone to VN or farmiliar to VN recently would know this.
I read some articles about iron ore last few days and they all mention this and I think this is important: steel demand and supplies. These 2 factors are the ultimate factors that will decide the price of IO. The question those articles focus on is: with China government cutting down steel production, at some stage there will be pressure on supplies and steel price will go up. When it goes up, China economy will suffer and China of course does not want to see that happen. So they will have to increase production of steel to meet demand. Also, as price of steel increases, the margin will be good and naturally many steel mills will pop in in VN, India, Indonesia, Malaysia, Pakistan, and Middle East, South America,...adding furtjer demand for iron ore and also help reduce our reliance on China market. So, demand and supplies are the ultimate factors.
Big major IO producers are scared by China's intervention in IO market and have not planed on major mine expansion and new mine openings. This will have significant impact on world's IO supplies in the years ahead, coinciding with the time CAP opening Hawsons Iron project to production.
Finally, the trend of major steel makers moving to green steel and thus high grade iron ore has so far been well documented and predicted.
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