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• Forex Flash: Falling steel prices sequesters optimism in China – Westpac

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FXstreet.com (Barcelona) - Ordinarily China's recent record performance
would be greeted with much optimism in the steel and iron ore industries. However, these are not normal times. Cold rolled steel prices have crashed 18% in the last year and are at the lowest level seen in two and a half years. Rebar prices are down 20% over the same period as housing construction in China has slowed sharply. The continued record levels of iron ore imports, record iron ore production, and record steel product production look very much at odds with the collapse in steel prices.

According to research analyst Robert Rennie at Westpac, "The collapse in Chinese steel prices and evidence of intense over-production of Chinese raw steel and steel product in Q2 warns of a price correction in iron ore in the coming weeks and months."

The months of July and August are normally weak periods in terms of demand for iron ore. "A period of idling on steel production in China seems likely to exacerbate that drop in demand - we would expect to see further weakness in iron ore prices over the summer period." he adds. Having hit 8 month lows in the last couple of sessions, logic suggests a re-test of the USD $120 lows seen ( TSI ) in October last year.

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