PERTH, March 21 (Reuters) – China’s steel sector, and the imported iron ore upon which it relies, are currently locked in a struggle between largely bearish longer-term structural factors and short-term cyclical influences, some of which are bullish.
It’s not unusual for an industry to grapple with competing narratives, but for China, which produces half the world’s steel and consumes two-thirds of seaborne iron ore, how the issues are resolved will have a flow-on effect through other parts of the economy, such as manufacturing, mining and construction.
The other impact of the tug-of-war of factors is likely to be volatility in prices as market participants try to reconcile the short-term drivers with the longer-term trends.
In recent weeks the price of iron ore has largely been driven by the ongoing fallout from the fatal tailings dam collapse in late January at a mine operated by Brazil’s Vale .
The market has since been trying to work out exactly how much of Vale’s annual production will be affected by the closure of the mine, and others operated by the company, as Brazilian authorities ramp up safety requirements on tailings dams.
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