After experiencing a strong rebound upon reopening after its harsh COVID lockdowns, China’s steel market has “collapsed,” according to Leslie Hook, Hudson Lockett, and Cheng Leng in the Financial Times. They write:
Chinese iron ore prices dropped to their lowest levels in five months, as weak demand adds to evidence that the country’s economic rebound from tough coronavirus lockdowns may be faltering.
After strong steel production during the first quarter, the optimism and activity that followed the end of lockdown have waned, leading to a “collapse” in the steel market and raising questions about the durability of the Chinese economic recovery.
The price of iron delivered into the northern Chinese port of Qingdao fell to $102.7 last week, down 23 per cent from its recent high in March, recovering slightly to $107.9 at Monday’s close.
The benchmark is regarded as a key price-setter for the global market because China is the world’s largest consumer of iron ore, the crucial ingredient for steelmaking. Iron ore is also a major profit driver for western mining companies such as BHP, Rio Tinto and Vale.
Normally March and April are peak production months for the Chinese steel market, but this year the country’s mills have cut their output in April as softening demand for steel makes it hard for them to generate profits.
During the first quarter, steel production at Chinese mills was 6.1 per cent higher than the same time last year, reaching 262mn tonnes, but customer orders have not kept pace, according to the China Iron and Steel Association.
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