Iron Ore, Steel Price Jumped Thanks to China
Iron ore and Steel had their best rally in years, till April, where iron ore prices rose more than 70%, from their December bottom and Steel price rose from Yuan 1580 per ton in December, last year to Yuan 2870 per ton in April.
They have fallen by quarter or more since then, largely due to regulatory actions, taken up by authorities to curb excessive speculations. Moreover, weak Chinese economic dockets have also taken their toll on prices.
However, despite the recent fall, these rallies have changed things a lot in the mainland. Steel factories are once again warming up, firing their engines, moving towards full capacity production.
Haixin Steel, which went bankrupt in spring of 2014 and saw its ownership changed is reversing its decision to cut back on planned capacity by 20% and planning to go for full production by end of the year, if price stabilizes.
China is world’s largest steel producer with around 900 million tons yearly capacity, producing more than 50% of global production. But recent changes in attitude, in arrival of fresh stimulus from the governments along with new bank loans, risk jeopardizing the balancing required, which means cutback of 150-200 million tons yearly capacity, if not by next year Chinese surplus would reach about same quantity.
With such surplus, without production rebalancing, constantly threatens the recovery in commodities in general, especially iron ore and Steel.