Monsters of Rock: Steel lobby issues note of caution on global steel demand as Ross Lyon nears St Kilda return

• Ross Lyon nears St Kilda return as World Steel Association revises down global steel demand outlook
• Coincidence? We think not
• In actual market news, Jervois sees cobalt prices plummet, but avoid losses in late trade

Is Ross Lyon bad for iron ore?

The AFL coach’s last grand final run with Fremantle came before the last iron ore downturn in 2013. His absence from the football landscape has coincided with a record bull run for iron ore prices.

Now he’s back, this time at St Kilda, alongside some  bearish steel demand numbers out of the World Steel Association this week. Coincidence?

Chinese steel demand contracted 6.6% in the first eight months of 2022, something reflected in an iron ore price that fell to a YTD low of US$90.21/t (Fastmarkets 62% Fe) yesterday.

The WSA thinks it will fall 4% for the whole year in China and 2.3% across to world to 1.7967Mt after an increase of 2.8% in 2021, with steel demand to recover 1% to reach 1.8147Mt next year.

China, the key market for iron ore prices given it is the destination of seven out of every 10 seaborne cargos, will see no growth in demand in 2023, the WSA think, tracking sideways as it pumps credit into its weakened economy and property sector.

(It’s also expecting Covid lockdown measures to be largely removed in the latter part of 2022, we’ll see about that.)

“The global economy is affected by persisting inflation, US monetary tightening, China’s economic deceleration, and the consequences of Russia’s invasion of Ukraine,” worldsteel Economics Committee chairman Maximo Vedoya said.

“High energy prices, rising interest rates, and falling confidence have led to a slowing in steel using sectors’ activities.

“As a result, our current forecast for global steel demand growth has been revised down compared to the previous one.”

Resilient exports

Developing economies outside China are expected to increase their demand for steel 0.6% this year and 3.5% next.

It is something Commbank mining expert Vivek Dhar, who as far as we know has no published opinions on Ross Lyon’s mooted return as St Kilda coach, says will support Australian bulk exports.

“Despite the gloomy outlook facing global steel demand, Australia’s exposure to Asia should support resilient coking coal and iron ore exports over the next 15 months,” he said in a note.

“An improving steel demand outlook in China in 2023 is positive for Australian iron ore exports and prices. Australia’s exposure to India and ASEAN countries should support coking coal exports.

“Additional demand and price support for Australian coking coal should come from advanced economies looking to replace their coking coal imports from Russia.”

Singapore iron ore futures posted a rebound today, lifting 1.95% to US$91.55/t.

The materials sector fell a narrow 0.3% today, with lithium and base metals stocks Mineral Resources (ASX:MIN), Pilbara Minerals (ASX:PLS), IGO (ASX:IGO) and South32 (ASX:S32) all in the good books.

Coal miners were the standouts though, with New Hope Corp (ASX:NHC) up 7.69%, Yancoal (ASX:YAL), fresh off a $1.9b cash build in the September quarter, up 5.87% and Whitehaven (ASX:WHC) up 4.59%.

Yancoal’s were the latest production figures to show just how badly New South Wales thermal coal production was hit in the September quarter, with the upcoming La Nina weather phenomenon increasing the potential of more strain on global supplies of high caloric value energy coal.

Monstars share prices today:

Jervois sinks on quarterly update

And last but not least $850 million cobalt miner Jervois (ASX:JRV) enjoyed a turbulent day, sinking to a low of 47c early in the day before rebounding to 56c, a 1.77% loss.

That jerky pattern came after a quarterly report which showed a 32% drop in the cobalt price had seen the company post an unaudited loss of US$25.5 million in the September quarter.

That means its year to date loss, unaudited, sits at US$22.6m, after reporting NPAT of US$2.9m in the first half.

The company, which saw sales from its Finnish operations increase 23% quarter on quarter and hopes to produce first concentrate from its new US operations in Idaho this quarter, says the outlook however looks positive for the battery metal in 2023.

“The cobalt market has stabilised after the recent downturn where the global macroeconomic situation, along with continuing Covid-related lockdowns, temporarily dampened demand,” JRV said.

“Risks of disruptions to global supply from the Democratic Republic of Congo are re-emerging.

“This may trigger re-stocking by downstream users which would favourably impact prices, should this occur. The outlook remains positive for 2023 and beyond.

“The growth in battery sector demand is poised to accelerate, the consumer electronics sector is expected to recover, while demand in traditional industrial uses is expected to grow broadly in line with global GDP.”

Jervois Global (ASX:JRV) share price today: