While the rapid ascent of iron ore prices since early August is the result of renewed buying by Chinese steel mills, a sustained rally has higher hurdles to clear.
The rally in the iron ore price since early August is in sync with a pickup in buying from Chinese steel mills who have been bolstering inventories from record low levels, according to Bank of America.
“Keeping in mind that steel mills have cut production of late, while steel inventories are relatively low, China’s steel market could rebound in the second half of 2023, and iron ore prices along with it.” “We don’t think the iron ore price rally can be sustained for much longer,” analysts at Capital Economics wrote in a report. They added that the uptick in steel demand from was “likely to prove temporary”.
In particular, the bank cited the decision by Chinese officials to allow major cities to relax home purchasing restrictions in non-core areas and to allow secondary cities to do the same in all areas. The property sector accounts for about 40 per cent of China’s iron ore demand.
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