Whether you are looking at the fundamentals of supply, demand, and macroeconomic development, or looking at price trends to understand how they compare to previous models, assessing price changes relative to Fibonacci levels, and data from high/low daily pricing .

One problem we have repeatedly seen is over-reliance on one indicator. The media likes headlines and only makes predictions based on one data point. Inventory levels fall—prices must rise, or imports increase—so demand must be strong.

If only life were really that simple.

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More experienced analysts understand this, and a recent Reuters article is a good example.

Many people believe that with strong steel demand and increased imports, iron ore prices have soared by 25% in just three weeks. China purchased approximately 70% of seaborne iron ore. Therefore, it is definitely the main driver of demand.

The post quoted Chinese customs data on December 7, which reported that iron ore imports in November were 104.96 million tons. This total is an increase of 14.6% over October and is the strongest month since July 2020.

All this sounds very optimistic, and it will undoubtedly support a slight fall in the price of China's Dalian Exchange, but it is still close to a multi-week high, with an equivalent of more than 100 US dollars per ton (up from 80 US dollars at the beginning of last month).

The market has also received support from the Politburo of China, which is expected to promote the "healthy development" of the real estate industry. Not long ago, the People's Bank of China announced a reduction in bank deposit reserve ratios to support slowing economic growth.

The central bank cut interest rates for the second time this year, this time releasing 1.2 trillion yuan (188 billion U.S. dollars) of long-term liquidity to support loans to the debt-laden real estate industry led by Evergrande. According to Reuters, the market is betting that the construction industry will recover after the winter slows down.

Most of the increase in iron ore imports is accumulated in port inventories. The current level is the highest level since 2012. At the same time, steel prices themselves are falling, with both rebar and hot-rolled coils on the Shanghai Futures Exchange falling.

Prices of other ferrous metals are also falling. Due to increased inventories and weak demand, stainless steel prices have reached a five-month low.

Another problem is the consumption of steel mills. The State Council of China has promised that China will reach its peak emissions by 2030, with a commitment to reduce emissions per unit of GDP by 65% ​​(unlike many people who hope that China will become the world's largest emitter, but it still affects heavily polluting countries, such as steel). If Beijing is serious about achieving this goal, restrictions on the steel industry this year may continue to a large extent.

Beijing’s commitment to promote the “healthy development” of the real estate industry should not be seen as a mandate to encourage unlimited construction as in the past. This may also mean that it will not allow speculative and largely uncontrolled construction, but if it feels that the industry may return too much enthusiasm, it will severely limit private companies’ access to funding.

Whether the debt-laden construction company will be allowed to survive is still inconclusive. Even if the largest is allowed to continue to exist, a few examples can be given. As Beijing continues its efforts to shift the economy to a more sustainable consumption model, the construction industry is unlikely to be a force in the past decade.

Therefore, further increases in iron ore prices based on increasing imports are far from a foolproof bet, but short-term trends indicate bullishness.

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