Fading China optimism hits iron ore prices, but not yet volumes: Russell
The opinions expressed here are those of the author, a columnist for Reuters.
By Clyde Russell
LAUNCESTON, Australia, Sept 3 (Reuters) -China's iron ore futures suffered their worst one-day price drop for almost two years on Monday, but the evaporating optimism in the market has yet to show up in imports of the key raw material for making steel.
Contracts on the Dalian Commodity Exchange DCIOcv1 ended day trading on Monday at 723.5 yuan ($101.83) a metric ton, 4.83% down from the previous close and the largest daily loss since Oct. 31, 2022.
The weakness was mirrored by Singapore Exchange futures SZZFc1, which closed at $96.60 a ton, down 2.13% from the prior close and the lowest since Aug. 16.
The catalyst for Monday's weakness was a raft of data that indicated that the world's second-biggest economy is struggling to gain momentum.
The private Caixin/S&P Global Purchasing Managers' Index (PMI) rose to 50.4 in August from 49.8 the previous month, beating analysts' forecasts in a Reuters poll of 50.0 and moving above the 50-level that demarcates expansion from contraction.
While this may initially appear like a solid outcome, the detail was less bullish with the key sub-index for new exports orders falling for the first time in eight months and at the fastest pace since November last year.
The Caixin PMI covers smaller and more export-orientated firms, so weakness in this measure is likely more significant than the strength in the rest of the survey.
The official PMI was also downbeat, with the August reading coming in at 49.1, down from July's 49.4, and falling for a sixth consecutive month.
The National Bureau of Statistics PMI focuses more on large and mainly state-controlled corporations and includes the key steel sector.
Further bad news for the steel industry came on Sunday, with the average price for new homes across 100 cities nudging up 0.11% in August from July, slowing from the previous month's 0.13% gain, according to data from property researcher China Index Academy.
The property sector has so far failed to respond to a series of stimulus measures from Beijing, and remains a drag on the overall economy.
ROBUST IMPORTS
Against this backdrop its perhaps no surprise that iron ore prices are struggling.
But what is perhaps surprising is how strong China's iron ore imports have been. China is the world's biggest buyer of seaborne iron ore, accounting for about 75% of the global total.
Official customs data for August will be released next week, but data from commodity analysts Kpler points to imports being the strongest since January.
August imports are estimated by Kpler at 109.1 million tons, which would be up from the customs figure of 102.8 million and the most since January's 111.9 million.
For the first seven months of the year iron ore imports rose 6.7%, and if August's official numbers are in line with the Kpler estimate, this pace of growth is likely to increase.
Part of the explanation for the increase in iron ore imports this year has been that inventories needed to be rebuilt, after dropping to the lowest in seven years in October of last year.
But since then more than 45 million tons have been added to port stockpiles monitored by consultants SteelHome SH-TOT-IRONINV, taking the total to 150.8 million as of last week.
This is close to the 27-month high of 151.8 million from late July and is a sign that inventories are at a comfortable level, and may be even too high given steel production is subdued.
In addition to re-stocking driving iron ore imports, it's also likely that optimism over the stimulus measures being put in pace encouraged some speculative buying of cargoes, especially as the iron ore price has trended weaker since early July.
But that optimism is also likely to have been dented by the ongoing soft data, leaving lower prices as the sole reason for China to import more iron ore than it needs to meet its current and likely future steel production.
The opinions expressed here are those of the author, a columnist for Reuters.
GRAPHIC-China iron ore imports vs SGX price: https://tmsnrt.rs/3Z9pTTb
Editing by Lincoln Feast
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
