|
|
The price of iron ore fell to $79.50 a metric ton on 31 October, down 17 percent last month from September and reaching its lowest point since November 2019 as the world’s economy—and China’s in particular—continue to slow, S&P Global Commodity Insights reported.
The price was less than half of what it was at its peak in March this year, when it traded as high as $162.
China has not altered policies restricting construction by limiting developers’ ability to borrow and discouraging speculation in real estate. October’s housing starts were 35 percent fewer than those a year earlier.
Also, Beijing maintains its drastic policy of anti-COVID lockdowns, which weighs on the country’s economic activity in general.
The policies have slashed demand for iron.
“The much-anticipated 20th [Chinese Communist Party] congress failed to deliver any concrete policies to stimulate the gloomy property market,” Malan Wu, raw materials analyst at Wood Mackenzie, told The Wall Street Journal.
An industrial park where Foxconn’s most sophisticated iPhone assembly plant is located began a seven-day shutdown on 2 November.
China has returned to investing heavily in infrastructure and the nation’s vehicle builders are boosting post-COVID production. However, those gains are not enough to overcome the downturn in steel markets due to the slump in building construction, Wu noted.
“The zero-COVID policy remains an overhang that creates additional uncertainty,” James Agar, chief buyer for global mining firm BHP Group, said in a WSJ interview.
Because China typically uses a third of the world’s iron ore shipped by sea, the country’s demand for iron ore is seen as a barometer of China’s economy.
China makes more than half the world’s steel and buys seven of every 10 tons produced, according to Australian government figures.
Iron is the main component of steel.
Steel makers will welcome lower iron ore prices as the weak market forces steel prices lower and shrinks producers’ margins, the WSJ said, but will reduce revenues and profits for mining giants such as Rio Tinto and BHP Group.
As economic activity weakens around the globe, iron ore likely will see a glut that will drop prices to about $70 per metric ton, Goldman Sachs analysts predicted.
Without a change to China’s insistence on dire antivirus closures, the market for iron and iron ore will tumble further, ANZ analyst Daniel Hynes told the WSJ.
TREND FORECAST: As the world shifts from fossil fuels to an electrically centered energy economy, and to composite materials in place of metal, demand for iron and steel will permanently decrease, though not precipitously.
At the same time, demand for copper, nickel, rare earth minerals, and materials key to electrical systems will continue rising for the foreseeable future.
While we do not provide financial advice, love it or hate it, agree or disagree, investing in new energy Climate Change products, materials, commodities, etc., is the future.