Monday, October 6, 2014

Peak steel could leave Australian iron ore miners in the lurch

The ABC has an article pondering a peak in Chinese steel consumption and the impact on Australian iron ore miners - Peak steel could leave Australian iron ore miners in the lurch.
Theres a disturbing new phrase being uttered by bears in the resources game - "peak steel". And its a very different phenomenon to the "peak oil" theory, where supply dries up and energy prices soar.

Peak steel is all about too much supply, not enough demand and tumbling prices. While not conclusive proof, the recent fall in iron ore prices is showing there is a significant rebalancing of supply and demand going on. Since the start of the year spot prices are down more than 20 per cent. ...

In a recent report, the analyst team from brokers CLSA noted that "peak steel demand would be seen this decade rather than next." The CLSA research cited factors such as "the slowing pace of urbanisation and demographic trends which are going sharply into reverse."

Increasingly Chinese developers are reducing their land banks and building smaller apartments, with floor-space construction falling 27 per cent in the first three months this year. Overall, CLSA forecasts a 37 per cent decline in private property floor-space sales between 2013 and 2020.

CLSA says steel consumption in the property sector is likely to peak this year, and a similar scenario is developing in infrastructure. "We also forecast infrastructure steel consumption to peak this year, with steel demand from road and rail construction to decline," the analysts noted.

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