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Iron Ore: Soaring And Roaring

Iron Ore: Soaring And Roaring

by Angelique Thakur, FN Arena

China’s economic growth strategy will be dominated by steel-intensive sectors and have led to a rebound in iron ore prices; Simandou’s impact on iron ore prices in the medium to long term.

-Implications of the China-led steel demand rebound 
-The Simandou project: a potential flashpoint
-Iron ore stocks to consider

The rebound in China’s steel demand, considerably faster than expected, has left Macquarie analysts surprised. But that’s not all. Citi economists expect China to set a growth target of 5.5% in its 14th five-year plan. Admittedly, it is less than the 6.5% rate of growth aimed for by China in its 13th five-year plan. But, as Citi points out, indicates moderation as opposed to collapse of growth as was feared.

China has also indicated this growth will mostly be led by its domestic market. But what pleases Citi is the how of it. It looks like China will be focusing on developing its infrastructure. In particular, steel-intensive sectors like infrastructure, property, and automotive will be the key pillars for China’s economic growth.

This leads Citi analysts to expect steel end-use demand to increase by 1-2% (year on year) per annum during 2021-23 versus the -1% decline that was forecast earlier.

There’s more. Macquarie points towards a steel demand recovery in the US, EU and Indian markets. According to Macquarie, the three catalysts for iron ore and steel include a continued recovery in the auto sector, stimulus by countries like China (focused on infrastructure development) and new proposed construction guidelines in China that could boost steel intensity in buildings (although there is no firm timeline for this).

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