Prices for the commodity have rallied despite the Asian giant’s property crisis, as the need for steel used in EVs stays strong. But analysts warn current prices are not sustainable.
, a mainstay for the Australian economy, this month has defied the doom and gloom surrounding the world’s second-largest economy, which is facing its biggest challenges in decades.
However, prices in the short term – while volatile – show no signs of crashing as government support for beleaguered property developers and lenders starts to trickle through. Meanwhile, life goes on for other sectors of China’s huge economy. given the property crisis in China and negative margins for steel producers. Most analysts think the current rally to about $US120 a tonne is unsustainable and prices are more likely to trade closer to $US100 a tonne over the next 15 months.
“When the government first came out in June and flagged these production cuts, people were expecting it to impact iron ore and coking coal demand, but in the past three months, execution has been very weak,” Matty Zhao, who heads Bank of America Securities’ materials research in Hong Kong, says. Vivek Dhar, Commonwealth Bank’s lead mining and energy commodities strategist, says China’s controls on steel output will have a bigger influence on prices in the second half of the year than they did in the first half. This could potentially push prices lower. Dhar predicts prices will be about $US100 a tonne by the end of the year.
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