Investors searching for signs of a double-dip recession could do worse than look at iron ore. Prices have tumbled by more than a third in three months, as Chinese steelmakers have scaled down production.
While prices for other commodities have stabilised after sharp falls in May, as concerns about a renewed slump rose, the price of iron ore, central to the global economy because of its use as a raw material for steel, has continued to fall.
Oil and copper, for instance, have recovered from recent lows, but spot benchmark iron ore – 62 per cent iron content – has dropped 18 per cent in the past three weeks and 36 per cent from its April peak.
At the same time, the Baltic Dry Index of freight costs, regarded by some as a barometer of the global economy when it plunged in 2008, has fallen 60 per cent in less than two months.
与此同时，反映船运成本的波罗的海干散货指数(Baltic Dry Index)在不到两个月的时间内大跌60%。该指数在2008年出现暴跌，当时被一些人视为全球经济的晴雨表。
The main reason for the plunge in iron ore is that record output by Chinese steelmakers flooded the market with steel this year. China’s economy, too, has been cooling as Beijing has sought to curb inflation.
“The world is awash with steel,” says Melinda Moore, commodities analyst at Credit Suisse.
“全世界钢铁泛滥，”瑞士信贷(Credit Suisse)大宗商品分析师梅林达·摩尔(Melinda Moore)表示。
That has pushed steel prices down and squeezed the margins of steelmakers, many of whom are paying contracted iron ore prices significantly higher than the spot price.
Tom Albanese, chief executive of Rio Tinto, on Wednesday acknowledged “some weakening in sentiment” due, in part, to a “slight slowdown in Chinese growth”.
力拓(Rio Tinto)首席执行官艾博年(Tom Albanese)周三承认“人气有所减弱”，一定程度上归因于“中国增长速度略有放缓”。
Steel Market Intelligence, a market research company, said the Chinese steel industry had brought its troubles upon itself by “producing high-cost steel at a breakneck pace”.
市场研究公司Steel Market Intelligence表示，中国钢铁业“正以非常危险的速度生产高成本钢铁”，给自己招惹麻烦。
“We are stunned by the lack of financial good sense by China’s high-cost steelmakers who continue to turn gold into straw,” it says.
Seasonal factors, such as a traditional manufacturing slowdown in China during summer rains, have exacerbated the effects of oversupply.
Government measures to cool economic growth and the removal of an export rebate have hit steel production.
A recent Steel Business Briefing survey showed that half of the mills surveyed expected to cut production this quarter, albeit by less than 5 per cent.
Steel Business Briefing最近一项调查显示，接受调查的钢厂中，有一半预计本季度将减产，不过幅度不到5%。
“Every mill that you talk to of a certain size is definitely getting in that mood,” says a Macquarie Bank analyst, noting that with steel prices flat compared with last year and iron ore prices at twice the price they were this time last year, mills have no incentive to continue producing.
Figures published yesterday showed crude steel output for June, on a daily average basis, fell 1 per cent from May.
But, in spite of the tough conditions, there are no signs yet that mills are defaulting on iron ore shipments, according to analysts and industry executives. In 2008, when commodity prices tumbled as the world sank into recession, many Chinese steelmakers were accused of defaulting to take advantage of cheaper spot prices.
Some analysts say demand is set to rebound after the traditionally slow summer period, as the slowdown will be temporary.
Analysts point out that apparent consumption of steel year-on-year in June was negative, in spite of the fact that end-user industries – car manufacturing and white goods, for example – rose at double-digit rates during the same period.
“The picture is being skewed by end users running down inventory,” says Rafael Halpin, analyst at Steel Business Briefing in Shanghai. “After such heavy destocking, even a slight rebound in demand for cars and white goods could boost demand for steel substantially later this quarter.”
“终端用户将耗尽库存，这令情形有些扭曲，”Steel Business Briefing驻上海分析师拉斐尔·哈尔平(Rafael Halpin)表示。“在如此大规模的去库存举动之后，对汽车和白色家电的需求即使只是略有反弹，也可能在本季度晚些时候大幅推高钢铁需求。”
Indeed, in recent days, spot iron ore has stopped falling and is trading at about $118 a tonne, close to the cost of production for some miners, while traders report increased activity on the market.
Prices may come under pressure this year as some new production comes onstream, but if Chinese demand continues to rise, analysts believe the market will remain tight for years.
Ms Moore says her preferred leading indicator of global industrial production – the price of scrap steel in Turkey – has since mid-June been rising.
英国《金融时报》杰克·福尔奇(Jack Farchy)、帕提·沃德米尔(Patti Waldmeir)、莱斯利·胡克( Leslie Hook )报道