Redcar
The redcar steel plant employed almost 2,000 peopleReuters

On 13 May 2015, China Daily reported that the Government had made the forthcoming 70th Anniversary Victory Day for the end of World War II (World Anti-Fascist War) on 03 September 2015, a public holiday.

With autumn being a most pleasant season in Beijing, there was only one possible matter that could spoil the big day – air pollution. With a huge industrial base in this city of over 20 million and many other heavy industry centres in nearby Tianjin Special Municipality and Hebei Province, smog can become so concentrated if there is no wind to disperse it, as to be the equivalent of smoking 40 cigarettes per day.

To make sure this did not happen, over 12,000 of the most polluting factories and power stations were ordered to close or curtail production, beginning on 20 August! This temporary shutdown worked and the parade and celebrations saw Beijing at its best, but there were many costs and one such was the loss of steel production. Many of China's larger steel mills were caught in the restricted area which stretched as far as Shaanxi Province and it is now estimated that six million tonnes of steel were not made that would have been otherwise.

To put that figure into some kind of perspective, that loss was about half of all the steel produced in the UK for 2014.

China is by far the world's largest steel producer and has done this in such a relatively short space of time as to be a phenomenon which has destabilized the old world order. Back in 1967 when Mao Zedong and his Red Guards were driving the country to ruin, China produced 14 million tonnes of steel, much of it of inferior quality, when the then world's biggest producer, the United States, made 115 million tonnes of a world total of 497 million tonnes.

In 2014, the USA produced just over 88 million tonnes, China 822.7 million tonnes, and the world 1.6 billion tonnes.

Last year then, China's share of global steel output was 49.4 per cent. This was not a problem when the country exported little and consumed the bulk of its output domestically – think of all that motorway building, much of it laid on a ferro-concrete bed; the railway lines, much of it for high-speed lines; the skyscrapers and urban expansion of often already large cities (don't mention Ordos, not yet a resounding success.

But with the slowdown in China's economy and many analysts suggesting an increase of (only) three to five per cent, much of China's steel output is seeking new outlets because the steel companies have not decreased production and are increasingly looking to exports for relief. This is causing reverberations around the globe, not least the "crash" in steel prices and all related commodities.

Reuters reported on 13 September that coal production in China to the end of August was down 4.8 per cent to 2.41 billion tonnes with coking coal (used to make steel) down 4.2 per cent at 301.5 million tonnes.

On 09 July 2015, The Guardian ran a headline that must have sent alarm, maybe even panic, throughout much of the world's steel industry, particularly in the comparatively high-cost "West":

"Steel 'cheaper per tonne than cabbage' in China as iron ore hits six-year low"

The story had been pieced together from various news sources and at the time of writing, iron ore prices had not been so low - $44.59 per tonne – since May 2009. The cabbage quotation had been made by market strategist Evan Lucas of London-based financial derivatives IG Group (IGG) and although iron ore prices have recovered since, there are massive new sources that are coming on stream in both the immediate and medium term future.

This new production was no doubt spurred and developed because of the high prices obtainable in the heady days of August 2011 when prices for Iron Ore Fines reached $177.50 per tonne. That price can now only be "in your dreams" for although there was a brief recovery to $60 in the late spring of this year, July saw a price of $44 again and a rebound to $55.70 during the past two months. On 01 October the price stood at $54.40 per tonne including insurance and delivery at the port of Tianjin, China.

Yes, that's right, the price is set more often than not at Chinese port cities.

Could be worse, and Australia's biggest and most efficient mining companies could live with that, some of them, only just. Bearing in mind that any month China fails to import more than 50 million tonnes of iron ore is a poor one for ore exporters, the immediate future is about to give ore producers the jitters.

Frik Els reported on Mining.com on 01 October that Australian magnate Gina Rinehart's Hancock Prospecting - she owns 77 per cent of the company – will see the fruition of her Roy Hill project in Western Australia's Pilbara region. With reserves put at around 2.4 billion tonnes, Roy Hill – the site is fully serviced and even has its own airfield - will start producing 55 million tonnes of iron ore per annum later this month.

A recent report by Citigroup forecasts that once Roy Hill is fully on stream, the price could drop to $40/tonne by early 2016, and that prices are likely to drop further after Brazil's Carajax complex starts producing an extra 90 million tonnes per annum by December 2016.

According to a UBS/Bloomberg report issued on 04 September, BHP Billiton and Rio Tinto have break-evens of under $30/t but BC Iron, another Pilbara company, is closer to $50/t and many smaller outfits, not just those in Australia but some in China too that depend entirely on the domestic market, need break-even rates well above this.

Looking higher up the production chain and the Shanghai SteelHome China Steel Price Index registered a year-on-year fall for the whole Index of 13 categories, between end-September 2014 and end-September 2015 of over 26 per cent.

The biggest fall of almost 29 per cent was for Medium Plate. Little cheer was to be had from the same Index for the week-on-week ending 05 October with a further fall of 0.75 per cent for the Steel Index, a noticeable fall of 1.32 per cent for Carbon & Alloy Structural Steel though a fractional increase in the price for Stainless Steel.

Although Shanghai SteelHome's Steel Index was down again on 13 October, the fall was just 0.12 per cent with Stainless gaining again by a better 1.05 per cent.