Iron ore tumbles as Chinese markets reopen

The spot price of iron ore has dropped after 5 days of gains despite mainland Chinese stock markets reopening yesterday (19 February 2024) following a 10-day Lunar New Year break.

Futures tumbled from the highest close since the end of January 2024, slipping some 3.3%, eroding the gains made last week.

With China’s markets now reopened, investors are poised to keep an eye on near-term steel demand in the world’s largest iron ore importer.

According to Trading Economics, prices for iron ore cargoes with a 63.5% Fe content for delivery in Tianjin dropped to US$128 per tonne in February, the lowest in 3 months.

Concerns remain about the intensifying rout in Chinese financial markets amid a yearning that the steel-heavy construction sector may soon recover.

However, worries over China’s long-running property crisis has seen iron ore backtracking this year.

In December 2023, new home prices in the country fell at what has been the sharpest pace since 2015, protracting already declining momentum and exacerbating slowing property demand in China.

The latest data shows China’s consumer price index (CPI) has also suffered the steepest fall since 2009 – around the time of global financial crisis (GFC) – and in January deflation rose to its highest level in 14 years.

Reports suggesting decreasing iron ore inventories in major steel mills have spurred expectations that restocking may be on the cards, which could stave off a greater pullback now the Lunar holidays have passed.

In the Australian government’s Resources and energy quarterly: December 2023, spot iron ore prices strengthened in the December quarter driven by then positive sentiment associated with the ongoing policy stimulus provided to the Chinese economy.

The report flagged prices were likely to drift lower over the outlook period.

Australian export volumes over H2 2023 remained healthy, reflecting an ongoing ramp up in new operations from established and emerging producers. Export volumes are expected rise steadily over the outlook period.

Australia’s iron ore export earnings were expected to rise from $124 billion in 2022–23 to $131 billion in 2023–24, before falling to $102 billion in 2024–25 — driven by the lower prices over the outlook period.

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Images: Fenix Resources & Australian government
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Written By Adam Orlando Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.