China’s iron ore and steel sectors are caught between expectations that conditions are about to improve and the reality that much of the current data is fairly soft.
The raft of data on Monday underscored this dynamic, with the National Bureau of Statistics reporting declines in China’s property prices, investment and sales.
January–February data showed property investment and sales fell 9.8% and 5.1% year-on-year, respectively, while new construction starts plummeted 29.6% following a 23.0% drop in 2024.
New home prices fell 4.8% in February from a year earlier, adding to the data that underlined that the key property sector has so far failed to respond to Beijing’s stimulus efforts.
The weak data weighed on iron ore prices, with futures on the Singapore Exchange (SZZFc1) dropping 1.1% to close at $102.65 a metric ton on Monday.
This is still up from this year’s low of $97.31 hit on Jan. 6, but also down almost 5% from the peak of $107.81 reached on Feb. 12.
China’s main domestic iron ore contract on the Dalian Commodity Exchange also eased on Monday, ending at 781.50 yuan ($108.09) a ton, down from 787.50 on March 14 and some 6.6% below this year’s high of 839 yuan from Feb. 21.
The Dalian contract has traded in a fairly narrow range since October, anchored at 800 yuan a ton, as the market awaits clear signals about the state of China’s economy, producer of just over half of the world’s steel.
The problem is that every time the market starts believing that Beijing’s efforts to increase growth are bearing fruit, a reality check is delivered in the form of soft data.
The weak property numbers came at the same time that the government ramped up efforts to stimulate consumer demand, with Beijing announcing at the weekend that it aims to “vigorously boost consumption”.
While the announcement lacked details, one area that was fleshed out was the expansion of the trade-in scheme, whereby consumers can upgrade appliances and vehicles using government subsidies.
At the margin this should be positive for steel demand as many appliances such as fridges and dishwashers are made from the metal, as are vehicles.
But cars and durable goods account for only about 17% of China’s steel demand, according to data from iron ore miner BHP Group
BHP, while building construction accounts for 24% and infrastructure a further 17%.
This means that even if the manufacturing side of the steel equation performs well, it won’t be enough to stimulate demand unless construction also starts to pick up.
STEADY STEEL
Steel output in the first two months of 2025 was somewhat mixed, with official data showing production of 166.3 million tons of crude steel, down 1.5% from the January-February period in 2024.
Daily output was about 2.82 million tons, which was up from the 2.45 million in December and also above the 2.75 million average for 2024 as a whole.
The question is whether steel output in the first two months should have been even higher than it was given the 6.7% jump in exports to 16.7 million tons.
Steel makers boosted outbound shipments as part of efforts to cash in ahead of the imposition of a 25% tariff on all steel and aluminium imports to the United States, one of new President Donald Trump’s signature tariff policies.
The start of the U.S. tariff on March 8 may lead to lower imports, but the impact may be not as bad as feared for steel exporters as U.S. steel makers are limited in how quickly they can increase production, meaning that steel consumers will be forced to continue importing and paying the tariffs.
For now, the level of uncertainty is high in the steel sector as it waits to see if Beijing can spark some growth momentum and also how Trump’s tariffs will play out over the next few months.
The views expressed here are those of the author, a columnist for Reuters.
Source: Reuters
