Commodity Roundup: Global steel production drops in April, metals under pressure

While China’s latest efforts to stabilise the crisis-hit property sector are a welcome boost to sentiment, they’re unlikely to materially boost demand for iron ore and steel, ANZ Research said on Thursday.

The most-traded September iron ore on China’s Dalian Commodity Exchange closed +1.1% at 894.50 yuan/metric ton ($123.72) after rising as much as 2.4% to 906 yuan/ton, the highest since February 20.

On the day, iron ore futures (SCO:COM) held steady at $117.64.

The new measures are expected to support a rebound in construction activity in the country’s property sector. “But they will do little to stimulate new projects, the real drivers of steel/iron ore demand,” ANZ said, as it expects the growth of the property sector’s steel consumption to fall 4% to 270mt in 2024.

Nevertheless, the measures are likely to provide some support to steel and iron ore prices.

Consequently, ANZ raised its short-term iron ore (one-to three-month) price target to $125/t, however adding that further price gains will likely be capped by persistent concerns over the state of the Chinese property market.

Potentially relevant stocks include Rio Tinto (RIO), BHP (BHP), Vale (VALE), Fortescue (OTCQX:FSUMF), US Steel (X) and Nippon Steel (OTCPK:NISTF) (OTCPK:NPSCY).

The latest data from the World Steel Association meanwhile showed a 5% year-on-year decline in global steel production to 155.7 million tonnes (Mt) in April, on the back of lower output from major producers like China, Japan, Russia and South Korea.

Global steel output fell almost 1% year-on-year to 625.4mt over the first four months of the year. China produced 85.9 Mt in April, down 7.2% on April 2023.

Overall, metal prices came under pressure on Thursday, as gold continues to trade sideways following the Fed minutes, and copper prices too slipped after a record-breaking rally.

Minutes from the two-day Federal Open Market Committee meeting ending May 1 showed that, while participants assessed that policy was “well positioned,” various officials mentioned a willingness to tighten policy further if required. Higher rates dent the appeal of non-interest-yielding gold.

ING analysts note that the recent price strength in metals, particularly copper, was becoming increasingly detached from short-term fundamentals. “Therefore, we would have likely seen some profit-taking from speculators,” they added.

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