China Needs a Lehman-Level Meltdown to Crash Its Steel Mills
- Date: 21-Sep-2021
- Source: Washington Post
- Sector:Oil & Gas
- Country:Middle East
China Needs a Lehman-Level Meltdown to Crash Its Steel Mills
From the way metal prices have moved in recent weeks, it looks like the wheels are falling off China’s property market.
The price of iron ore futures in Dalian has dropped by half over the past two months, accelerating Monday after the government announced fresh winter pollution curbs for northern steel-producing cities, which typically cut output and demand for rust. Add to that the travails of China Evergrande Group, the property developer that’s at risk of defaulting on some of its $300 billion of liabilities, and it makes up a bearish picture for ferrous metals.
China consumes half the world’s steel, and its property sector alone accounts for about a fifth of global demand, according to Liberum analyst Tom Price. Should a Lehman-style crisis spiral out from Evergrande, the impact would be dramatic. Just how dramatic, though? A look at past steel crises gives some clues.
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