Economic slowdown and ore prices
Recent years have been a rollercoaster for all actors in the metallurgical industry. The relatively stable economic growth has shown signs of weakness in 2019, it has been hit hard by the pandemics in 2020 and 2021 with an even later impact on China. At the other end of the spectrum, we have witnessed swift market recovery and supply chain shortages with rocketing prices for certain metallurgical ores, complete change of market dynamics, with increased interventionism of the Chinese government in the supply and demand rippling though out the entire world.
The sudden change has caught the supply chains and energy industries unprepared and inflexible to such high variations in demand leading to extremes such as negative oil prices or tenfold electricity prices. The war in Ukraine has only added to the struggling infrastructure issues. Whereas the supply chain backlogs have reduced and the situation gets normalized, energy is still far from such a scenario. The underlying structural issues for the entire energy sector and its transformation are here to stay for a while despite the huge efforts deployed in the last 2 years by all actors across the globe.
In this context, we now experience the aftermath of the high energy prices translated into inflation, increased general cost of living, and eroding savings. The construction industry has slowed down almost to a halt and it will take time to recover, even in China, which is struggling with its structural issues. Investments are at a cyclical minimum, PMI indexes being down in both Europe and the USA, with these regions bordering recession. China is no longer the bull charging ahead to sustain ore demand.
We keep looking for the light, which can only be triggered by the natural recovery from lower energy prices (be it oil, gas, or electricity) with some time lag to take effect in the real demand and confidence of the investors. But, as the recent past showed us, we will see the prices changing in short bursts, as apparent demand is more volatile now and psychological factors have a higher impact.
