Monsters of Rock: Is there upside in Chinese steel data?
Link copied to
Weaker than expected economic signposts out of China isn’t what anyone wanted out of the National Bureau of Statistics’ monthly data dump today.
Retails sales were awful, falling 11.1% year on year against Bloomberg estimates of -6.2% and property sales and new starts down 13% and 10% respectively against the March numbers.
But there is a silver lining. The Covid situation in Shanghai is improving now with cases close to zero.
Crude steel production, one of the big numbers of relevance for the Australian economy, was down 5.2% on April 2021 at 92.78Mt. At 336.15Mt steel output through the first 4 months of the year is down 10.3%.
That might seem bad, but it’s actually pretty positive for iron ore producers.
Iron ore prices have dropped from a 2022 peak US$162/t for 62% fines in March to US$126/t today, but remain at relatively high levels.
While the number is down on last year it’s important to remember the first half of 2021 was the most productive half-year for steelmaking in China ever.
The countries enforced slow down in the second half of 2021 hammered prices, but they have since recovered with the current steel output looking more consistent and expected upside from promised infrastructure investment in China through the second half of 2022.
And it’s well above recent averages.
Chinese #steel production in April slightly stronger than I expected. Sure April was down -5%yy and -7.5%ytd versus 2021. However, 2022 ytd is up 8% versus average over the last 5 years with April circa 1std above 5yr average. Infrastructure story bubbling along in background? pic.twitter.com/RfwJstmTY6
— Robert Rennie (@Robert__Rennie) May 16, 2022
On the other hand steel mills have seen profit margins slip amid weak end-user demand, MySteel reported, resulting in lower prices for raw materials like iron ore.
The materials index narrowed early losses to finish down 0.48% for the day.
Mineral Resources (ASX:MIN) was the top performing large cap miner, up 1.76% after reporting the start of concentrate production from its Wodgina mine in the Pilbara last last week.
Battery metals stocks were also solid, with Jervois Global (ASX:JRV) up 6.45%, Sayona Mining (ASX:SYA) gaining 6.25%, Pilbara Minerals (ASX:PLS) up 5.56% and Mincor Resources (ASX:MCR) shares climbing 4.76%.
Positive news drove large gains for Chrysos Corporation (ASX:C79) and Australian Stategic Materials (ASX:ASM), although the latter pulled back after a barnstorming morning session driven by an announcement on a complex investment from a South Korean consortium.
Meanwhile, Nickel Mines (ASX:NIC) was up 0.9% after announcing the commissioning of the fourth and final rotary kiln electric furnace line at its Angel Nickel Project and the acquisition of the Siduarsi nickel-cobalt laterite project in Papua in Indonesia.