Sell-off in iron ore shows no signs of slowing, as outlook for demand deteriorates – ANZ

The outlook for iron ore demand continues to weaken amid restrictions on Chinese steel output and a slowing housing market. This raises the downside risks for iron ore prices, economists at ANZ Bank brief.

Steel against further headwinds

The steel making raw material has been under pressure as China steps up efforts to reduce the steel industry’s impact on the environment. To reach the goal of producing less steel this year, output in H2 2021 would need to fall to 495mt, down 23% YoY. This is likely to see authorities regulate the domestic market with targeted environmental checks.”

“Liquidity problems at China’s largest real estate developer, Evergrande, have brought back into focus the government’s efforts to cool the property market. As a means to improve its financials, the developer has cut prices and sped up construction on near completed projects to raise funds. This is likely behind the surge in residential buildings under construction. However, new developments have shown no signs of acceleration; and, with land sales low, this is unlikely to improve in the short-term.”

“Steel and iron ore demand are likely to weaken further in the second half of the year.”