Iron ore and steel do not follow the world wide trend of recovering metal prices

While metal prices have risen significantly since Tuesday - copper, for example, has risen 5% to $ 5,800 a ton - the iron ore price has reacted only briefly. Almost all of the previous day's profits were returned to the SGX in Singapore yesterday, and are still below $ 80 a ton. A similar picture emerges at the DCE in Dalian. The price of reinforcing steel in China has so far only made up a small part of its heavy losses since the beginning of the week. The virus-related concerns of market participants apparently have a particularly strong impact on steel and thus also on iron ore. A number of steelmakers from various provinces in China have recently announced that they will cut production by 30%. Because on the one hand they do not receive enough raw materials due to the transport restrictions, on the other hand there are signs of a brake on demand for steel, especially from the construction sector and the manufacturing sector. For example, the auto industry is badly affected (see precious metals above). Lower steel production is also likely to have an impact on iron ore demand. After last year's supply problems, the seaborne iron ore market is now threatened with a collapse in demand should the situation in China not return to normal quickly. The seaborne market is likely to be clearly oversupplied this year because, in addition to the impending decline in demand, production in Brazil and Australia will be significantly expanded. In our opinion, this speaks for lower prices.

Source: Commerzbank Research, Photo: Fotolia