[Ferro-Alloys.com]China accounts for a significant portion of demand for commodities. With the country now in an economic crisis, the materials that it once imported in vast quantities are having a hard time finding a home. With metal prices lying in the balance, the longer it takes China to clean up its act, the further depressed metals prices will be.

 

Deutsche Bank is not optimistic that 2016 will be any better for steelmaking metals. “The mining sector, in hindsight, has massively overshot in terms of their expected delivery for iron ore into China in the next few years.” Deutsche bank research analyst Jorge Beristain told CNBC.

 

The analyst also pointed out that over the last year and a half, China has become a big exporter of steel, an “unexpected U-turn” for the country. “And that flood of product, whether its steel or aluminum, is looking for a home globally — driving down world prices for those commodities.”

 

Overall, the expectation is that prices will continue to feel the pressure of the oversupplied market.

 

Dealing with the issue of oversupply, 14 of China’s top aluminum companies said they wouldn’t restart production that had previously been shut down. The firms also said they would not open any new smelters in the coming year. With the expectation that supply would be cut, prices reacted accordingly and bounced up a tad earlier in December. However, as Daniel Hayes, analyst with ANZ Bank told The Wall Street Journal wrote, “a sustained aluminum price recovery would depend on deeper cuts and on how well China’s economy performed in the next three to six months.”

 

Before investors can expect a turn around, the market is in dire need of a rebalancing.

 

 

Article from Interent for Reference only