The benchmark contract has declined each week since July 5 and is down 29% from its peak up to now in 2024 of $143.60 a ton, reached within the first week of the yr.
Whereas the declining worth just isn’t fairly a capitulation, it does present market sentiment has shifted away from optimism that Beijing’s efforts to spice up the beleaguered development sector would enhance metal demand, to the fact that metal mills are struggling for earnings and gross sales.
Latest worth strikes and knowledge on China’s metal sector, which accounts for simply over half of world output, have been bearish.
Benchmark Shanghai metal rebar contracts ended final week at 3,286 yuan ($458.55) a ton, the bottom shut since October 2020, and they’re now down 20% because the begin of the yr.
The China Iron and Metal Affiliation mentioned crude metal output at its members’ mills was 1.9735 million tons per day within the interval from July 21 to 31, down 8.1% from the prior 10-day interval, with the trade affiliation blaming mushy costs.
Official metal manufacturing knowledge for July is anticipated this week, however is unlikely to change the declining pattern seen up to now in 2024, with Nationwide Bureau of Statistics knowledge displaying crude metal output of 530.7 million tons within the first half of this yr was down 1.1% from the corresponding 2023 interval.
China’s metal buying managers’ index fell by 5.3 factors to a one-year low of 42.5 factors in July, considerably under the 50 degree that demarcates enlargement from contraction, knowledge from the China Metal Logistics Skilled Committee confirmed.
Iron ore imports
Whereas metal’s woes have weighed on iron ore costs, up to now this yr import volumes have held up pretty nicely.
This has largely been pushed by restocking with port inventories monitored by consultants SteelHome rising from a seven-year low of 104.9 million tons in October to a 27-month excessive of 151.8 million within the week to July 26.
Within the two weeks since, stockpiles have eased barely to 150.4 million tons within the seven days to Aug. 9, suggesting that stock restocking could also be largely full.
Additionally it is price noting that China’s iron ore imports rose 6.7% to 713.77 million tons within the first seven months of the yr in comparison with the identical interval in 2023.
This was a rise of 44.31 million tons, a determine near the rise of 46.9 million in port inventories because the October low.
It seems that metal mills and merchants have taken benefit of the declining pattern in iron ore costs to revive inventories, however now that they’re at comparatively excessive ranges, the query is whether or not there may be any urge for food to proceed including to them.
Evidently August’s iron ore imports will stay wholesome, with commodity analysts Kpler monitoring 97 million tons up to now, a determine more likely to rise earlier than the tip of the month as extra cargoes are assessed.
July’s official imports have been 102.81 million tons, and the pattern up to now this yr has seen imports anchored in a slim vary both aspect of 100 million.
However with metal output declining and the total yr unlikely to match final yr’s 1.02 billion tons, it’s exhausting to be bullish on iron ore import volumes and costs.
(The opinions expressed listed here are these of the writer, Clyde Russell, a columnist for Reuters.)
(Modifying by Clarence Fernandez)