The iron ore price is feeling the pinch of a bearish demand outlook and weakened China economy, with futures falling below $US100 per tonne late last week.
According to Mysteel, the price for 62 per cent seaborne Australian iron ore fines at the port of Qingdao fell $US3.60 ($5.29) on Friday to $US96.35 ($141.58) per dry metric tonne (dmt).
Mysteel also observed the most-traded September iron ore contract on the Dalian Commodity Exchange close Friday’s daytime trading session at $US95.50 ($140.33)/dmt, down 10 per cent from Thursday’s settlement.
China’s economy has endured a tough time of it of late, principally due to strict social restrictions and lockdowns derived from the country’s COVID-zero policy.
In June, the Organisation for Economic Co-operation and Development (OECD) forecast Chinese growth of 4.4 per cent in 2022, a decline from its predicted 5.1 per cent growth in December 2021.
The manufacturing sector in China has been hit particularly hard by aggressive COVID-19 suppression measures in key trading hubs such as Shanghai and Shenzhen, while construction activity is also down.
The Resources and Energy Quarterly, which contains forecasts for the value, volume and price of Australia’s major resources and energy commodity exports, said China’s ailing property sector was of particular concern.
“China’s residential property market remains a major risk to economic growth in 2022 as developers seek to deleverage and manage ongoing liquidity concerns,” the report stated.
“Consequently, new property starts continued to trend lower in April 2022 – 28 per cent lower year-on-year.”
Rio Tinto has flagged “considerable” headwinds in China and a “weakening” economic outlook amid the Russia–Ukraine war and tighter monetary policies to curb rising inflation.
The major miner said prices for its commodities decreased during the second quarter of 2022, with growing recession fears and a decline in consumer confidence to blame.
“China’s industrial activity troughed in May amid COVID lockdowns,” the company said in its quarterly report. “June recovered but uncertainties remain given the potential for ongoing outbreaks.
“Economic stability is a focus (in China), but headwinds are considerable from restricted labour and goods movement and a slowing external environment.”
Mysteel labelled it a ‘Black Friday’ as other ferrous commodities such as steel, coke and coking coal also faltered.