Column: China’s commodity import trend driven by prices, not economy
China's imports of major commodities are often viewed through the prism of the performance of, and outlook for, the world's second-biggest economy.
Iron ore prices fell for a seventh straight session on Thursday, dropping to an eight-month low as demand from Chinese steelmakers struggling with rapidly rising inventories dry up.
The benchmark import price of 62% iron ore fines at China’s Tianjin port dropped over 2% to $125.60 a tonne, down 5.4% since the start of the week and more than 25% weaker than this time last year. Tianjin ore averaged a record $168 during 2011.
Chinese import prices are now the lowest since November 8 2011 according to data provided by Steelindex, when the steelmaking ingredient was recovering from a crash in October. During that month iron ore shed $60 a tonne from all time highs above $180.
Reuters quotes a physical iron ore trader in Shanghai as saying: “If you throw some cargoes in the market nobody’s willing to buy, nobody’s even willing to think about buying. With prices going down the way they are, who wants to take a chance? There’s absolutely little hope.”
China Daily quotes an iron ore trader in the port city of Rizhao in China’s eastern Shandong province: “People have been comparing this year to the 2008 crisis. The difference is in 2008, traders wanted to get a loan and the banks refused. But this year, banks want to lend, but traders have refused because they are really pessimistic about the market and the global economy.”
Chinese mills have been producing at record pace of 2 million tonnes per day since April despite a steep drop-off in demand as the country’s building boom begins to look more and more unsustainable.
China almost produces as much steel per year than the rest of the world combined and a weak steel market quickly flows through to iron ore.
Further clouding the outlook is record iron ore supply from Brazil’s Vale and Anglo-Australian giants BHP Billiton and Rio Tinto.
The world’s leading producer Vale on Wednesday announced record output for the quarter of 80.5 million tonnes while the number two and three producers are ramping up output to a combined 400 million tonnes this year.
The total seaborne global iron ore trade is worth some 1 billion tonnes a year.
RELATED NEWS
Here is China’s Bridge to Nowhere. It also happens to be the world’s longest >>
I’ll have mine rare: Chief of $10 billion Chinese Pilbara project now prefers beef over iron ore >>
