Lockdowns killed demand for construction materials, with people unable to leave their homes to go to work or build new ones.

Property was woeful, with National Bureau of Statistics figures showing new home starts fell 38.9 per cent over the first 11 months of the year.

The China Iron and Steel Association now says China probably produced 1.01Bt of crude steel in 2022, down 2.2 per cent on 2021 levels and a second yearly drop since the Middle Kingdom delivered a record 1.065Bt in 2020.

But CISA secretary-general Qu Xiuli also expects demand for steel to rise in China in 2023 as Covid prevention and control measures are made more open, according to comments at an industry summit in Beijing over the weekend.

The fall off in demand was extreme last year. S&P Global says steel producers who were making a healthy $US129 on every tonne of rebar produced in early February saw their margins collapse to negative $US80 in June and a spare $US1.7/t in late December.

Where iron ore prices end up is hard to say. But futures markets have been alive with optimism.

The 62 per cent Fe Singapore contract for February rose 2.79 per cent on Tuesday to $US120.35/t, a level not seen in over six months.

At the same time, mill owners in China are said to be bearish on the prospect of delayed projects to add new steel making capacity being commissioned in 2023.

Part of a swap program to bring more environmentally friendly tonnes into the market, the net increase of Chinese steelmaking capacity in 2023 will come to 12Mtpa of pig iron and 18Mtpa of crude steel after net rises of 5.4Mtpa and 5.3Mtpa in 2022, S&P estimates.

“China’s steel market may remain under big pressure in the first half of 2023 given poor steel demand and comparatively high steel production,” S&P’s Clement Choo said last week.

“However, most market sources believed steel demand in the second half of 2023 to improve from a year ago and the first half of 2023, although it might not be able to rebound to late 2021 level.”

Juniors prepare for iron ore turnaround

Majors will, again, be making sensational profits at current iron ore prices, even if the October plunge that afflicted the sector may mean less than impressive numbers for some producers in their upcoming December quarter reports.

Juniors will be watching closely where those prices head.

With smaller economies of scale, iron ore minnows are more sensitive to shifts in the price of the bulk commodity given they don’t boast the ~$US20/t cost bracket of Rio Tinto (ASX:RIO), BHP (ASX:BHP) and Fortescue Metals Group (ASX:FMG).

Strike Resources (ASX:SRK), which started and then paused production at its Paulsens East mine as prices fell last year, is edging towards a solution for a potential start on its Stage 2 development.

It received works approval yesterday for marine environmental work to undertake transhipment operations at the Port of Ashburton for the export of up to 1.8Mtpa.

That completes the suite of Department of Water and Environmental Regulation approvals SRK needs to export up to 10,000t per day from the port in Onslow, traditionally an LNG export hub.

That’s important since the 235km trip from Paulsens East to Ashburton is around a third of the length of its previous transport route to Utah Point in Port Hedland, some 650km away.

CZR Resources (ASX:CZR), which will share the port infrastructure at Ashburton for its Robe Mesa deposit next to where Rio is currently drilling the Mesa F deposit at its Robe River JV with Mitsui and Nippon Steel, also took a step toward production by securing mining licences on Monday for its Robe Mesa and P529 deposits.

It followed the signing of a Mining Agreement and mining consent with the Robe River Kuruma Aboriginal Corporation.

“CZR has a clear strategic goal to grow the size and forecast production rate from the Robe Mesa iron ore project, to make it resilient throughout the economic cycles and a more valuable asset for CZR and its shareholders,” CZR MD Stefan Murphy said.

“The granting of Mining Licences covering the Robe Mesa deposit, following a collaborative agreement with the Robe River Kuruma Traditional Owners, has been a goal of CZR for many years and further de-risks our project, adding value to the Robe Mesa asset.

“Iron ore is largely driven by logistics and marketing, and CZR has shown over the past month that much of the hard work behind the scenes is beginning to pay off, with the pit-to-port value chain taking shape and bolt on acquisitions secured to further enhance our project scale.”

Will China’s coal ban reversal change anything?

And now to coal where the talk over the New Year has been dominated by the reversal of an unofficial ban on Australian coal sales to China.

It comes after a thawing of the relationship between the Australian and Chinese governments.

Yesterday Chinese Ambassador Xiao Qian told reporters that was no such thing as official sanctions on Australian exports, saying Chinese companies may have demurred given trade relations between the countries.

Whatever the truth, and it’s certainly not that, the reversal doesn’t appear to be opening the floodgates, but could see a trickle of trade between Aussie coal miners and Chinese steel and power companies resume.

Reuters and Bloomberg have reported that importers have begun to place orders for Australian coal cargoes, with Bloomberg saying met coal giants Glencore and BHP are among those to have agreed sales.

But some commentators, such as Reuters columnist Clyde Russell, say the impact of the ban’s reversal is likely to be more symbolic than anything else.

Russell says miners who have found other buyers elsewhere will be reticent to jump straight back into the China market, especially with demand for thermal coal surging and prices for high quality 6000kcal product around $US400/t.

“In short, it will likely take some time to rebuild trust and trading relationships. Add in a likely price disadvantage and it’s hard to see Australian thermal coal charging back into China,” Russell said.

Met coal could be a different story. Australia was comfortably China’s largest seaborne supplier before the ban was enforced, prompting the country to buy more logistically complex tonnes out of Mongolia and Russia.

A run in coking coal prices in recent weeks has partly closed the unusual situation the global energy shortage brought to bear, where generally cheaper thermal coal has been more expensive than premium hard coking coal for several months.

Australian premium hard coking coal, like that produced by BHP at its BMA operations in Queensland, is paying around $US310/t against $US395/t for Newcastle energy coal.

The gap was in excess of $US150/t last year.