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The great China slowdown – Part 4

The great China slowdown – Part 4

As we have noted previously, global steel consumption is expected to decline 3 per cent in 2015 to around 1.6 billion tonnes. According to Macquarie Research, apparent steel consumption from China is down 6 per cent over the nine months to September 2015 and this is largely related to the Chinese construction market, with residential construction demand expected to be down 10 per cent in 2015.Screen Shot 2015-11-06 at 3.41.57 pmAccording to Macquarie, “the only people who still seem to think there is significant upside in global steel consumption akin to the past decade (when it grew by an average annual 50 million tonnes) are the major iron ore producers – for example BHP’s belief global steel consumption will hit 2.5 billion tonnes by 2030 – just a further 50% upside required there!”

The global steel industry has been operating at a 75 per cent to 80 per cent capacity utilization rate since 2009. The price of Hot Rolled Coil (HRC) and Rebar (Reinforcing Bar) is now running at 15 year lows in China (at RMB2,000/ tonne).

Our conclusion: until we see the permanent closure of at least 10 per cent of global steel capacity (and that is twice the current US annual production of around 80 million tonnes), we expect steel prices, iron-ore prices and metallurgical coal prices to remain depressed.

To learn more about our domestic and global funds, please click here, or contact me, David Buckland, on 02 8046 5000 or at dbuckland@montinvest.com.


Chief Executive Officer of Montgomery Investment Management, David has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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