RE: One trillion dollars24 Aug 2024 15:54
Below the linked article (thanks, MM) there's another mining.com article with a less encouraging title :
Iron ore stumbles…China bears return
August 23, 2024 | Markets Australia China Iron Ore
The headline is misleading : the article's actually quite positive, arguing that housing construction may not be the critical factor in iron ore demand - and hence prices.
(1) It shows that, whilst building starts may have collapsed, actual construction/completion has held up well over the years.
(2) While Chinese real estate construction remains an important driver of steel demand, it’s not what it used to be.
.."during China’s rapid growth phase in the early 2000s, construction (including housing, office, and industrial buildings) accounted for almost half the country’s steel demand…. Today, it’s less than a quarter, or just 24%.
.. machinery construction is now the single biggest driver of steel demand in China.
That includes machinery for mining, agriculture, tools and the millions of parts shipped worldwide for vehicle manufacturing.
Yet, the media remains fixated on the decade-old idea that iron ore demand depends exclusively on China’s real estate market.
The reality couldn’t be any different; demand drivers within China’s steel industry is today far more diverse compared to the country’s growth phase from the early 2000's.
Machinery 2010 : 20 %, now (2023) 30%;
Infrastructure 13%, now 17%;
Construction 42%, now 24%;
Transport 12%, now 9%;
Durable goods 7%, now 8%;
Other 6%, now 12%
Simplistically, the 18% drop in construction-led share of demand has been handily offset by 20% 'other demand', from engineering, infrastructure and 'other' (10 + 4 + 6%).
(3) The article - worth reading in extenso - then goes on, more speculatively, to say
.."Western media holds a very superficial view of China’s economy… The narrative is overwhelmingly bearish and usually defaults to weakness in the country’s real estate market.
But consider this: China holds a long track record of manipulating commodity prices to its advantage.
As the world’s biggest consumer, China can manipulate iron ore prices and fulfil its longer-term objectives.
Given this authoritarian state’s broad reach across Chinese-owned entities, including steelmakers, it can easily collude with them to drive down iron ore prices whenever it is strategic to do so.
Curbing steel production could be part of a coordinated plan by authorities and subservient steel makers to undermine the price of iron ore.
However, once the CCP deems prices sufficiently depressed, I believe it will shift gears and ramp up stockpiling efforts, just as it did throughout the pandemic years.
And that was despite minimal demand for steel at the time.
Paradoxically, today’s bearish sentiment in the iron ore market could signal long-term strength as China attempts to decrease prices and secure more supply...."
And more in the same
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