OK. At the close, DCE Oct IO futures
US $100.65 Last:720 Yuan Chg:-18So what is happening? Rebar prices are, predictably, falling and the mills and traders are destocking aggressively due to the new standards coming in soon. At the same time, news is circulating that the government will enforce production caps on steelmakers in Tangshen, Hubei province, one of China's steel makinging hubs. This is pretty standard practice just prior to peak demand season, but it certainly scares the horses (pretty much the object), even if it doesn't happen in the end. And on top of this, bank lending in China tumbled in July, dampening general market sentiment,
Now, it seems we also have a new cop in town, the CMRG (China Resources Mineral Group), which was created specifically in 2022 to enhance China's buying power. It's director, Jia Yanlin, is forecasting that IO demand will fall this year by 33.4 million tonnes. Of course, you wouldn't expect him to say that demand is going to rise. That's not his brief. So, basically, we have a very concerted effort to drive down prices, just before peak demand hits.
This can work for a bit, but it ends up depleting reserves in the end, as demand and hot metal production inevitably bounce back. Already we are seeing mill stocks fall to only 20 days supply (see below). A snapback, heading into peak production time, is inevitable.
https://www.hellenicshippingnews.com/iron-ore-hits-over-1-year-low-as-bleak-china-credit-data-adds-to-demand-woes/https://www.mysteel.net/market-insights/5060244-sour-market-sentiment-sends-dce-iron-ore-prices-collapsingWEEKLY: China mills' imported iron ore stocks at 4-mth low
Source: MysteelAug 15, 2024 13:15
(20min delay)