Ships waiting to be loaded with iron ore are seen at the Fortescue loading dock in Port Hedland, in western Australia’s Pilbara region, December 3, 2013. REUTERS/David Gray/Archive Photo
LAUNCESTON, Australia, Aug 15 (Reuters) – A string of bad economic data in China is putting pressure on iron ore prices, which are struggling to hold above the key psychological level of $100 a ton.
However, weak indicators in China’s struggling real estate sector have not yet resulted in a significant drop in import volumes of the key raw material for steelmaking.
Commodity analysts Kpler and Refinitiv estimate imports will top 100 million tons in August. This would be the first time since March’s 100.23 million tariff figure.
Kpler estimates that China, which buys about 70% of the world’s iron ore from the sea, will register imports of 108.5 million tons in August, while Refinitiv reports a more conservative 100.8 million tons.
While those figures are likely to be revised as more shipments are assessed, iron ore imports are likely to pick up again from the official 93.48 million tonnes in July, the lowest since April.
Lower iron ore spot prices in recent weeks are likely to encourage traders and steel mills to boost imports.
It is also true that there is still optimism that Beijing will step up its stimulus measures to prop up not only the real estate sector but also other steel-intensive industries such as manufacturing and infrastructure.
Iron ore futures in Singapore closed at $103.47 a tonne on Monday, down 1.3% from the previous close and near the three-month low of $103.21 set on Aug. 3.
The immediate catalyst for the decline was more bad news from China’s real estate sector, with major developer Country Garden (2007.HK) attempting to delay the payment of an onshore private bond for the first time.
Country Garden’s troubles are fueling fears of contagion in China’s cash-strapped real estate sector.
China’s iron ore imports compared to price
Loans tumble
Adding to housing woes was data released on Tuesday that showed China’s industrial production and retail sales fell, falling short of forecasts.
Industrial production rose 3.7% yoy, slowing from June’s 4.4% growth, while retail sales rose 2.5%, down from a 3.1% increase in June and missed analysts’ forecasts of 4.5% growth.
There was more bad news in data released August 11, which showed China’s new bank lending plummeted in July. The 345.9 billion yuan ($47.8 billion) issued was down 89% from June and the weakest since late 2009.
The weak credit numbers added to the bad sentiment caused by the world’s second largest economy slipping into deflation in July, falling both imports and exports and persistently weak manufacturing indices.
Certainly the economic data do not speak for stronger iron ore import volumes.
This means that if the projected increase in August imports is to continue in the coming months, the market must assume that the stimulus measures will take hold and that steel demand will sustain or even increase.
There are signs that the authorities are stepping up efforts to stimulate the economy. The central bank cut interest rates on Tuesday, the second cut in three months.
Lower iron ore prices could also boost imports, but only if traders expect prices to recover and downward pressure doesn’t signal the start of a new downtrend.
Another potential factor supporting iron ore imports is the low state of port inventories, which last week fell to their lowest level in just over three years.
Inventories at ports fell to 116.5 million tons in the seven days ended Aug. 11, from 120.5 million the previous week, according to consultancy SteelHome.
They are also below the 138.6 million tons in the same week in 2022 and the 127.2 million in 2021.
Overall, iron ore imports are likely to be torn between the reasonable fundamentals of weaker prices and low inventories at ports and bearish sentiment stemming from mounting troubles in the Chinese economy.
The opinions expressed here are those of the author, a columnist for Reuters.
Edited by Robert Birsel
Our standards: The Thomson Reuters Trust Principles.
The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and impartiality under the Trust Principles.
Comments are closed.