This page has been archived and commenting is disabled.

Chinese Iron Ore, Steel Prices Collapse Despite Government Stimulus

Tyler Durden's picture




 

A funny thing happened in the last year since China gave up on its hard-line reforms and folded back to stimulate by all means necessary... the financial economy soared and the real economy sunk. Iron Ore prices are near record lows and Rebar prices are at record lows as stocks spike.. and this should be no surprise since we were told by a rural Chinese chap recently that "making money in stocks is a lot easier than farmwork" or construction or real world activity.

 

 

As Reuters reports,

"Steel prices in China have continued to fall despite the rally in iron ore prices in the last month, limiting the ability for steel mills to pay increasingly higher prices for ore," Australia and New Zealand Banking Group analysts said in a note.

 

With Chinese steel demand expected to wane as hotter temperatures over June and July slow construction activity, the ANZ analysts said they expect iron ore to fall back below $60 per tonne over the coming month.

 

A sustained decline in stockpiles of iron ore across China's ports has helped fuel a 40 percent rally in the steelmaking commodity from a decade-low of $46.70 in April.

 

Shanghai rebar prices in contrast rose only around 4 percent from April lows before pulling back again this week.

 

Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI dropped 0.8 percent to $64.50 a tonne on Monday, according to The Steel Index (TSI), retreating from a near five-month high of $65.40 reached last week.

 

"The continuing fall in steel prices in China is beginning to weigh on sentiment, with mills looking increasingly squeezed," TSI said, citing a further decline in prices of spot steel products in China, including billet and rebar.

 

A slowing Chinese economy has hit industrial demand with steel consumption continuing to shrink in the first quarter of this year after contracting in 2014 for the first time in more than three decades.

And for an even clearer example of reality - Rebar prices are hitting record lows...

 

Not a sign of turning demand in the economy... not the lagged pickup in construction actvity that so many believe the stock market surge will bring... instead just more of the same as monetary policy transmission mechanisms are all glued up and fundsa flow directly to financial asset inflation.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 06/16/2015 - 20:05 | 6203878 nmewn
nmewn's picture

Print ore bitchez!

Tue, 06/16/2015 - 21:54 | 6204183 Publicus
Publicus's picture

Price chart looks like gold and silver!

Tue, 06/16/2015 - 22:33 | 6204283 Bunga Bunga
Bunga Bunga's picture

Looks like Bank of China is really printing gold, silver and iron not money.

Tue, 06/16/2015 - 20:09 | 6203893 kowalli
kowalli's picture

ladder to hell

Tue, 06/16/2015 - 20:10 | 6203897 silverer
silverer's picture

Welcome to the law of supply and demand.  Gung Ho, comrades!

Tue, 06/16/2015 - 20:14 | 6203898 One And Only
One And Only's picture

The stock market is not a function of the economy. It's a function of money and credit created by a central bank.

For example:

From 2006 to 2007 the Zimbabwe stock exchange went from 1,000,000 to 4,000,000. It didn't matter that the UE rate was 100% or the supply/demand of some commodity over another. Maybe you could sell your portfolio and buy a days worth of bush meat because the currency was beaten like Harry Reid but the fact of the matter it happened because of money and credit creation.

Look at our economy today. It sucks. But stocks are near all time highs. Why? Reckless monetary policy which is showing itself in sectors like education and healthcare. You want to see where inflation is? Look at any place the Federal Government is involved because the Federal Government is the medium in which the Fed is creating inflation. The private sector is still in the ICU.

For the record, "green energy" will never be economically viable as long as the government is involved in the manner in which they are.

Tue, 06/16/2015 - 20:19 | 6203918 kowalli
kowalli's picture

"green energy" will never be economically viable. end

Tue, 06/16/2015 - 20:30 | 6203954 gmak
gmak's picture

+1  Until the cost is less than that of greatly diinished other sources of energy. Then we will find out that it's not really green - just dirtier in the front end than in the back.

Tue, 06/16/2015 - 20:45 | 6203993 One And Only
One And Only's picture

And at least carbon dioxide is plant food. Pretty sure plants don't use lithium ionized battery acid that never biodegrades.

Tue, 06/16/2015 - 20:11 | 6203900 Newsboy
Newsboy's picture

Now Paging Greater Fool: Please pick up Red Courtesy Telephone!

Tue, 06/16/2015 - 20:16 | 6203913 i_call_you_my_base
i_call_you_my_base's picture

There is no money in making things. Only in flipping assets.

Tue, 06/16/2015 - 20:22 | 6203930 Bighorn_100b
Bighorn_100b's picture

Smoke and mirrors.. If your building islands out of nothing, wouldn't you want low prices on raw materials?

Tue, 06/16/2015 - 20:22 | 6203933 walküre
walküre's picture

the Trump campaign will surely address this...

Tue, 06/16/2015 - 20:26 | 6203941 Jack Burton
Jack Burton's picture

OUCH! This is gonna hit my local economy hard! We already shut down an iron mine and processing plant. Layoffs of several thousands. Now a further weakening of Iron Ore demand in China, and the lower prices, will double down on the local layoffs. I smell a localized depression coming along Minnestoa's Iron Range and railroad and shipping ports.

We produce high quality Iron pellets on the margine. Low cost producers like Brazil have ramped up prodcution in an effort to use low prices to capture market share. I see my fellow citiznes here sleep walking to disaster. I ask them about Brazil, and they don't even know where it is, more the less do they know Brazil is part of the market forces about to crush local miners. Ignorance is bliss, I know a few housholds that will learn about Brazil and China the hard way.

Tue, 06/16/2015 - 20:32 | 6203958 nakki
nakki's picture
  1. The word for today is Rehypothecation it is a practice that occurs principally in the financial markets, where a bank or other broker-dealer reuses the collateral pledged by its clients as collateral for its own borrowing.  
  2. So you borrowed money and used someone else's, someone el,e's some one else's iron ore and steel as collateral and now, not only don't you have said ore/steel its actually worth less.
Tue, 06/16/2015 - 21:02 | 6204046 Youri Carma
Youri Carma's picture

This is a very dangerous situation for the Chinese government and the U.S. because at the time this bubble bursts the Chinese government maybe likes to have war going with the U.S. instead of the other way around.

Wed, 06/17/2015 - 05:10 | 6204773 Magooo
Magooo's picture

NEED MORE GHOST TOWNS!

Wed, 06/17/2015 - 07:31 | 6204896 NoPension
NoPension's picture

I'm starting to think those ghost towns are simply above ground , camouflaged material storage. Easily available for reuse in the future.

I recall someone posting they where in China, and reinforced concrete was being placed without tying off the rebar. His speculation was it is easier to demo and recycle.

Do we have enough of the basics above ground? There is probably enough iron, copper and aluminum mined and processed to satisfy demand. Simply recycle scrap, at half the cost. Seems to be plenty.

Old roads can be processed reusing the aggregates, and by adding new cement or asphalt, recycled endlessly.

Maybe we have enough stuff.

Do NOT follow this link or you will be banned from the site!