Commodity imbalances twist prices

<p>Kia ora,</p><p>Welcome to Monday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news the week is starting with new stresses in the world of commodities.</p><p>In China, who produces about half the world's steel (using coal fired furnaces), the price of steel is rising. In fact, it is on the rise everywhere. Not only is the global recovery behind the surge, but the expected faster transition to greener economic policies and incentives are also too, in an ironic way, adding to the rise. The Chinese want to lessen their use of coal in steel production, so output is expected to fall when demand is rising. </p><p>And the big new infrastructure plans in the US are expected to pass in some significant form, keeping demand high. And the policy drive to build new 'greener' infrastructure in Europe adds further demand. Although some new steel-making capacity is being added, more is being taken out, and the rising demand is expected to be much faster than the ability of manufacturers to supply.</p><p>The <a href="http://www.dce.com.cn/DCE/Products/Industrial/Iron%20Ore/index.html" target="_blank"><strong>iron ore price</strong></a> is staying at the top of its 2021 range (and some newish <a href="https://www.afr.com/companies/mining/rio-tinto-iron-ore-takes-300m-inflation-hit-20210716-p58a8l" target="_blank"><strong>Aussie supply issues</strong></a> may be behind some of that), and <a href="http://www.dce.com.cn/DCE/Products/Industrial/Coking%20Coal/index.html" target="_blank"><strong>steel making coal</strong></a> is up as well. Demand for thermal coal is rising for electricity production and to keep prices under control. To add irony, China is <a href="https://mp.weixin.qq.com/s/cRbztJRZs-r2IfJdBBEfAw" target="_blank"><strong>releasing supplies</strong></a> from its strategic reserves. <a href="http://www.dce.com.cn/DCE/Products/Agriculture/Corn/index.html" target="_blank"