The start of China’s peak construction season was supposed to finally boost demand for iron ore, which has endured a tempestuous year with prices now trading near this year’s lows.
However, the bounce has not happened, with traders now puzzling over what could be the next catalyst for a price rally in the crucial steelmaking material.
China’s usual boom period for infrastructure construction and steel-related demand in September and October has so far offered no reprieve for investors in the iron ore market, which just notched its longest streak of weekly losses on record. The Chinese economy continues to contend with a severe housing slump and COVID-19 lockdowns.
Bets that fresh financing for the property sector — which accounts for one-third of steel consumption — would aid demand recovery during the peak season have since unraveled, with the 100 biggest real-estate developers seeing sales of new homes last month plunge by one-quarter. That is even as financial regulators rush to stem the liquidity crisis, telling the nation’s six largest banks to offer at least 600 billion yuan (US$85 billion) of net financing.
While steel mills typically restock iron ore supplies before the Chinese National Day holidays at the start of October, their profit margins are also languishing and they are limiting purchases to a needs-only basis.
Meanwhile, China’s purchasing managers’ index last month rose only marginally to 46.6. A reading below 50 suggests contraction in the steel industry.
“It’s certainly the worst autumn since 2015,” Tomas Gutierrez, an analyst at Kallanish Commodities, said in e-mailed comments. “Real estate is far too big a part of the whole economy and no other sector can expand rapidly enough to make up for lost construction steel demand.”
Gutierrez was referring to the period seven years ago that also saw a sharp slowdown in China’s property and factory activity.
The raw steel-making ingredient that is crucial for the construction, machinery and automotive sectors is regarded a barometer of Chinese growth. The World Bank’s most recent forecast shows the nation’s economic expansion would decelerate to 2.8 percent this year, a mere third of the 8.1 percent rate last year. That bleaker outlook would limit the upside in iron ore prices.
With the Chinese economic outlook and its consumer confidence appearing grim, steel prices will be capped, said Kamal Ailani, a senior analyst at McCloskey by OPIS, which is owned by Dow Jones & Co.
Layered atop economic woes, the growth in China’s steel production last month has also triggered concerns about oversupply, Ailani said.
To be sure, not all market players are pessimistic, with some analysts expecting prices to at least stabilize this quarter.
“In my years in steel, 2015 is probably the worst year, and, fortunately, we are not there yet,” Richard Lu, a senior analyst at CRU International Ltd, said in e-mailed comments.
CRU forecast some improvement this quarter, with steel demand supported by new infrastructure projects.
Meanwhile, Ailani expects iron ore prices trading down from current levels, but still “well supported around [US]$85 a ton” this quarter.
Below that level, small to medium-sized miners might have to reduce production given increased costs, he said.
The slump in China’s construction sector has also crushed global demand for bulk ships. Freight rates to hire a Capesize vessel have plummeted almost 80 percent from October last year, most of it due to weaker iron ore demand from the nation, traders and shipbrokers said.
For now, shrinking stockpiles are still providing some buffer for the steel market, although investors will be eyeing the looming Chinese Communist Party congress that is scheduled to start on Sunday for signs that the government would make any changes to its COVID-19 and property deleveraging policies.
OpenAI has warned US lawmakers that its Chinese rival DeepSeek (深度求索) is using unfair and increasingly sophisticated methods to extract results from leading US artificial intelligence (AI) models to train the next generation of its breakthrough R1 chatbot, a memo reviewed by Bloomberg News showed. In the memo, sent on Thursday to the US House of Representatives Select Committee on China, OpenAI said that DeepSeek had used so-called distillation techniques as part of “ongoing efforts to free-ride on the capabilities developed by OpenAI and other US frontier labs.” The company said it had detected “new, obfuscated methods” designed to evade OpenAI’s defenses
NEW IMPORTS: Car dealer PG Union Corp said it would consider introducing US-made models such as the Jeep Grand Cherokee and Stellantis’ RAM 1500 to Taiwan Tesla Taiwan yesterday said that it does not plan to cut its car prices in the wake of Washington and Taipei signing the Agreement on Reciprocal Trade on Thursday to eliminate tariffs on US-made cars. On the other hand, Mercedes-Benz Taiwan said it is planning to lower the price of its five models imported from the US after the zero tariff comes into effect. Tesla in a statement said it has no plan to adjust the prices of the US-made Model 3, Model S and Model X as tariffs are not the only factor the automaker uses to determine pricing policies. Tesla said
China’s top chipmaker has warned that breakaway spending on artificial intelligence (AI) chips is bringing forward years of future demand, raising the risk that some data centers could sit idle. “Companies would love to build 10 years’ worth of data center capacity within one or two years,” Semiconductor Manufacturing International Corp (SMIC, 中芯) cochief executive officer Zhao Haijun (趙海軍) said yesterday on a call with analysts. “As for what exactly these data centers will do, that hasn’t been fully thought through.” Moody’s Ratings projects that AI-related infrastructure investment would exceed US$3 trillion over the next five years, as developers pour eye-watering sums
Australian singer Kylie Minogue says “nothing compares” to performing live, but becoming an international wine magnate in under six years has been quite a thrill for the Spinning Around star. Minogue launched her first own-label wine in 2020 in partnership with celebrity drinks expert Paul Schaafsma, starting with a basic rose but quickly expanding to include sparkling, no-alcohol and premium rose offerings. The actress and singer has since wracked up sales of around 25 million bottles, with her carefully branded products pitched at low-to mid-range prices in dozens of countries. Britain, Australia and the United States are the biggest markets. “Nothing compares to performing
RSS