The S&P/ASX 200 ended the week in the red with all 11 sectors closing lower after data pointed to a slowing in China’s economy and a continued weak housing market.
The index wiped off 72.70 points, or 0.87%, to close at 8,283.20 points on Friday (18 October).
However, over the past five days the S&P/ASX 200 is ahead 0.84% and sitting 1.21% off its 52-week high.
China’s third-quarter economic growth came in 0.9% higher compared to the previous quarter, which was marginally below expectations of a 1% increase. This was despite a higher-than-forecast 5.4% increase in industrial production.
Iron ore miners felt the pinch as prices of the steelmaking commodity continued down from their October peak of over US$112 ($167) a tonne to around US$105 ($156) a tonne.
BHP (ASX:BHP) slid 2.16% to $42.06 while Fortescue (ASX:FMG) dipped 1.85% to $19.54.
S&P Global Ratings sees iron ore prices averaging around US$110 a tonne for the rest of 2024, before dipping to US$100 a tonne in 2025 and US$90 a tonne in 2026 continuing into 2027.
Donald Marleau, an analyst at S&P Global Ratings, says China’s dominance as the largest global steel producer with output plateauing at about 1 billion tonnes, means Chinese demand for iron ore remains the main driver of pricing.
“Hence, in the near term we take the view the Chinese stimulus measures are likely to support prices for 2024 and into 2025 in a manner consistent with current futures prices,” he says.
“We also believe that downside risks for iron ore prices are likely to continue into 2026 and 2027.
“The main source for risks for steel demand and iron ore prices reflect the potential for the structural problems in the Chinese property market to persist.”
Marleau says the Chinese property market consumes about 250 tonnes of steel now – a bit more than 25% of total production, which is about 100 tonnes less than when the property market was at its peak before the pandemic.
“If measures aimed at absorbing the glut of unoccupied homes and boosting consumer confidence – thereby giving impetus to the property market and hence stabilising demand in the home construction sector – prove anemic, steel demand from property construction and consequently for iron ore could continue to weaken,” he notes.
Uranium players also ended the week in the red, with Paladin Energy (ASX:PDN) dropping 4.15% to $12.49, while Deep Yellow (ASX:DYL) retreated 3.57% to $1.49.
Gold miners, however, are enjoying their time in the sun as the price continues hitting new records, and is now fetching over US$2,700 an ounce as of late Friday.
Westgold Resources (ASX:WGX) climbed 4.36% to $3.11, De Grey Mining (ASX:DEG) witnessed a 1.50% gain to $1.39 and Newmont (ASX:NEM) advanced 0.82% to $84.45.
The S&P/ASX200 is Australia’s leading share market index and contains the top 200 ASX-listed companies in terms of market capitalisation, and accounts for about 80% of the country’s equity market. The index is designed to measure the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalisation
It is recognised as the institutional investable benchmark in the country.
Write to Angela East at Mining.com.au
Images: Stock & S&P Global
