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China's iron ore and steel swing between optimistic outlook and grim realities: Russell

China's iron ore and steel swing between optimistic outlook and grim realities: Russell

China's iron and steel sector is caught between the expectation that conditions will improve and the reality of much of the data that currently exists.

This dynamic was highlighted by the National Bureau of Statistics' data released on Monday, which showed a decline in China's investment, sales and property prices.

Data from January-February showed that property sales and investment fell by 9.8% and 5.1% respectively year-on-year. New construction started dropped by 29.6% after a drop of 23.0% in 2024.

The new home price fell by 4.8% from the previous year in February, adding to data that showed that Beijing's efforts to stimulate the property market have not yet had any effect on the sector.

Iron ore futures at the Singapore Exchange fell 1.1% on Monday to $102.65 per metric ton.

It's still higher than the low of this year, which was $97.31, but it is also lower by almost 5% than the high of $107.81 on February 12.

China's domestic iron ore contract at the Dalian Commodity Exchange eased as well on Monday. It ended at 781.50 Yuan ($108.09), down from 787.50 last March 14, and 6.6% lower than this year's peak of 839 Yuan on February 21.

Since October, the Dalian contract has been trading in a relatively narrow range, with the price of a ton of steel at 800 yuan, while the market waits for clear signals on the economy of China, which produces just over half the world's total steel.

Soft data are a reality check every time the market begins to believe that Beijing's attempts to boost growth have been successful.

Beijing announced at the weekend it would "vigorously increase consumption" in response to the weak numbers.

The announcement was lacking in details but one aspect was expanded, namely the government's trade-in program, which allows consumers to upgrade their appliances and vehicles with subsidies.

This should have a positive impact on steel demand, since many appliances like refrigerators and dishwashers as well as vehicles are made of metal.

According to BHP Group data, China's demand for steel is dominated by building construction, which accounts for 24%, and infrastructure, which makes up another 17%.

Even if steel production is strong, this won't be sufficient to boost demand until construction picks up.

STEADY STEEL

The first two months in 2025 saw a mixed picture of steel production. Official data showed a total of 166.3 millions tons of crude iron and steel. This is a 1.5% decrease from January-February 2024.

The daily output reached 2.82 million tonnes, up from 2.45 million in Decemeber and above the average of 2.75 million for the whole year 2024.

It is worth asking whether the exports of steel to 16,7 million tonnes, which grew by 6.7% in the first two month should have been higher.

Steelmakers increased outbound shipments in an effort to capitalize on the impending 25% tariff on steel and aluminum imports into the United States. This is one of President Donald Trump’s signature tariff policies.

Steel exporters may not be as badly affected as they thought, as U.S. producers are restricted in their ability to increase production. This means that steel consumers must continue to import and pay the tariffs.

Steel sector is still in a state of uncertainty as it awaits the outcome of Trump's tariffs and if Beijing will be able to spark some growth.

These are the views of the columnist, an author for.

(source: Reuters)