The latest high-frequency read of Chinese steel production remains incredibly strong, with annualised total production of 781mt in the first 10-days of August. This is ~8.5% higher than early August 2012.
With steel inventory now at more comfortable levels and iron ore port stocks low, it makes a lot of sense that iron ore prices have rocketed to ~$140/t. Indeed, those suggesting some kind of
conspiracy appear very lazy given there is a huge amount of freely available information on the Chinese steel sector that fits together into a cohesive story.
The ongoing strength in Chinese steel production means that most forecasters will be ratcheting up their full year consumption numbers. And with seaborne iron ore supply on par with expectations (or a little lower due to underperformance of Brazil) it seems most will be upgrading their price forecasts even if it remains risky that growth rates fade into year end.
Ex China steel trends remain relatively stable according to the latest data from worldsteel. European steel comps have been improving in the last few months, although still lay below last years weak levels. While the PMIs have pointed to improvement in manufacturing, construction activity still looks too weak to drive a genuine revival in steel production.
Key met coal importing countries continue to drift a little higher than levels seen last year. Met coal prices have picked up a bit from recent lows, although it doesn't appear to be driven by anything powerful happening outside of China. More likely it seems that the ongoing strength in Chinese steel demand and low prices are driving some stocking interest.
