Chinese Steel, Iron Ore Demand Sees an Upturn in Optimism

China: Economic forecasts outside of China have been less than optimistic lately, as central banks increase interest rates to manage inflation and all eyes turn towards the world's second-largest economy, China. At an Informa Iron Ore and Steel forecast conference in Perth, Western Australia last week, participants expressed optimism that China might be able to help offset some of the global demand slowing this year. China's GDP growth rate is at its lowest since 1972 - only 3 percent from a year ago - but they are still aiming for a 5 percent growth by 2023, which would likely surprise and benefit the global economy.

The 5% GDP growth target was deemed conservative by some while others considered it to be a pragmatic one giving the right message to global markets without overpromising growth in 2023, considering prospects of a slowing global economy and China's exposure as a key exporter.

Steel demand in China is expected to be driven by solid growth in the infrastructure sector. Housing starts, which are an important gauge for steel used in real estate, have declined steadily since 2022 and were down 9.4% from the same period last year in January-February 2023. Despite measures to make credit more accessible, the property industry is still seeing pressure due to the sustained decline of housing starts.

Mount Gibson's Koolan Island operations is set to increase shipping of high-grade (65pc Fe) iron ore cargoes towards the end of this month as crushing capacity increases. The company estimates that approximately 2.9 million tons of the ore will be sold. Iron ore prices have been rising again since sinking below $80/dry metric tonne in 2020, likely due to an anticipated surge in Chinese demand.

Demand for high-grade iron ore is expected to rise in the long term, with Europe looking to expand its direct reduction iron capacity from under 1 million tonnes currently to 40 million tonnes between 2035 and 2040.

Mount Gibson Mining Co., a company engaged in the extraction of iron ore, has announced an expectation of an average grade of 65% Fe and a shipment rate of 4 million wet metric tonnes per year. The firm is aiming to ship 600,000 wet metric tonnes of high-grade iron ore in the January-March quarter and 1 million wet metric tonnes in the April-June quarter.