Raw materials. The shadow of Evergrande hangs over the markets. The Chinese real estate giant is faltering, and investors are holding their breath. Will fall? Will not fall? The price of iron is suspended from this question. Trained in a course worthy of a roller coaster. Fragile heart refrain.
In May, it ignited, with the revival on stage, drum beating, of the Chinese economy, followed by the gradual resumption of activity of the other countries emerging little by little from the crisis linked to Covid-19. A ton of iron ore was trading at its highest, at 230 dollars (196 euros), on the Singapore futures market. And clinched a historic record.
But, little by little, the Evergrande soap opera occupied people’s minds. The financial setbacks of the Chinese group gave investors a hard time, and the price of iron ore was rolled. It sank as if carried away by the weight of the concrete. Indeed, this metal is very popular with builders. As a result, a ton of iron ore has lost nearly 60% of its value since the peak in May, falling below the $ 100 mark, to nearly $ 90. A level that it had not known since March 2020, when all raw materials were thrown to the carpet by the explosion of the Covid-19 pandemic.
Rebound
The price of iron ore also fell after Beijing’s decisions to limit production of steel, of which it is a key component. The Chinese government is thus trying to reduce CO emissions2 of its most polluting industrial activities. An accentuated effort since July, as the 2022 Winter Olympics loom. Now or never to be whiter than snow.
But the iron has spring. All it took was a statement from the president of giant Evergrande, calling on his group to “To implement everything” to honor its commitments, so that the downward pressure is eased. On Wednesday September 22, when an agreement was announced with bondholders, the price of the ore jumped 15%, going back above the rating of 100 dollars per tonne. But with its 260 billion euros in debt, the financial structure of the property developer remains fragile. Will the house of cards fall apart? In the iron market, you have to keep nerves of steel …