Iron ore navigates choppy seas amid some positive China signs

LAUNCESTON, (Australia): Amid volatility in most commodity markets, iron ore has been relatively stable over the past two months, despite a cloudy economic outlook for top importer China.

The price of benchmark 62% iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, ended at $96.10 a tonne on Sept 30, down 3% from the prior week’s close.

But the price has been in a range of $95 to $120 a tonne for the past three months, having settled after spiking as high as $160.30 in the weeks after Russia’s invasion of Ukraine on Feb. 24.

The spot price’s stability has persisted in recent weeks as perceptions of the state of the Chinese economy have shifted, varying from optimism amid expected stimulus measures from Beijing to pessimism over a problematic construction sector, the strict zero-COVID policy and the potential weakening of exports as the global economy cools rapidly.

China buys nearly 70% of seaborne iron ore volumes and accounts for about half of global steel output, making the state of its economy the key market determinant for iron ore.

Concern over China’s economic outlook was not dispelled by a modest bounce in the key Purchasing Managers’ Index (PMI) in September.

The widely watched manufacturing index climbed to 50.1 points, just above the 50-level that separates growth from contraction, and up from 49.4 in August.

But the outcome was largely viewed as soft, especially since most of the COVID lockdowns had ended during the month and the authorities had ramped up efforts to stimulate the economy.

However, the key indicators for iron ore remain fairly positive, with imports holding up, port inventories slipping, while steel output is set to recover.

China is likely to have imported 87 million tonnes of seaborne iron ore in September, according to estimates from Refinitiv, while commodity consultants Kpler pegged arrivals at a higher 95.17 million tonnes.

The estimates don’t include overland imports from Russia and Mongolia, and therefore tend to be lower than the official customs data, which will be released after the week-long Golden Week holidays that began on Oct. 1.