The iron ore market has been under the strongest supply and price pressures in the last six months in recent days. Bloomberg has prepared a report in this regard, which shows that the demand has decreased due to the sharp decline in steel production by China to revive environmental indicators in the field of health. This trend will continue as Chinese steel supply and demand decline over the next month. This has led to a sharp Falling iron ore prices. In the following, we will interpret these conditions and the pressure that has been applied to the global iron ore market. Please be with Artan Press.
*** Falling iron ore prices from the perspective of Bloomberg and Global Steel
Bloomberg alone has not studied the iron ore market. Many analytical journals in the field of steel have made the unfortunate situation in iron ore pricing their main subject. In this regard, MySteel Global announced in the headline of its magazine yesterday that according to the publication of the monthly report of the China Iron and Steel Association CISA on July 21, China’s domestic steel prices are expected to fluctuate in the short term as fundamental principles change. And supply and demand gradually decrease.
Leaking into the structure of China’s steel economy is likely to affect steel market movements around the world. Under these conditions, the downstream steel chain will feel more impact than other areas. The global iron ore market in addition to these regulatory policies will be accompanied by falling prices and declining trading value. The association noted in a recent report that the domestic steel industry is under pressure to reduce production, while demand from downstream steel-consuming industries is also likely to weaken. Unprecedented pressure will be placed on the iron ore market after the corona pandemic control.
*** The role of China’s consumption behavior in Falling iron ore prices
Regarding the control of the international iron ore market, we should have a look at the behavior of large consumers in this field. Every year on such days, China enters the traditional season of declining steel consumption in the summer, which was not unexpected. On the one hand, heavy rains do not allow outdoor construction activities, and on the other hand, roads are blocked due to floods. The iron ore production and supply infrastructure is not in a position to motivate consumers to buy. Singapore futures fell 18 percent in two weeks.
Beijing, meanwhile, is stepping up its efforts to reduce pollution from one of its dirtiest industries. The Shagang Group, the world’s fourth-largest steel plant, announced this week that it would limit overseas production and sales to follow government efforts to reduce emissions.
*** Beijing seeks to reduce steel production
Beijing’s efforts to reduce steel production under the plan and vision set last year have so far been unsuccessful, with production rising 12 percent in the first half from a year earlier. This raises expectations that activities should be significantly limited by the end of the year. At the same time, China has taken more steps to curb foreign shipments. These measures are aimed at using exports and less inventory to compensate for the shortage of supply in the domestic market.
The fact that China is seeking to weaken iron ore has a major economic reason and huge benefits for it. China is currently the largest final consumer of steel. The lower the cost of steel for this country, the lower the cost of infrastructure development in this country. The communist system is based on this ideological foundation that justifies the purpose of the instrument. Therefore, despite the blow and closure of some Chinese steel producers, this goal will continue with strength.
*** Expert Opinions on China’s Steel Restrictions
Commodity analysts at the Commonwealth Bank of Australia (ECB) said in a note that Chinese steel restrictions are weakening demand for iron ore. Keeping production stable this year means a 12 percent drop in production in the second half of the year. “We do not expect Chinese crude steel production to be so suppressed,” he told Bloomberg. But China’s steelmaking is now facing a more negative wave than declining steel demand. This story has left aftershocks in the world’s major commodity markets and stock exchanges.
Singapore futures fell more than 9 percent to $ 175.95 a tonne before trading at 7.7 percent. Dalian prices fell 7.9 percent and closed. The future rate of steel rebar retreated. These are just a small part of the impact of Chinese regulatory decisions on the global steel market.
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