Islamabad
Iron ore prices have defied investors’ expectations and climbed by almost two-fifths since May, driven by a surge in Chinese steel production in spite of the near collapse of the country’s real estate sector.
Prices for the bulk commodity, a crucial ingredient in steel, have climbed 38 per cent over the past seven months to $133.95 a tonne, Argus data shows.
The rally has taken off since August. Analysts say the spark was Chinese officials telling steel manufacturers that an annual production cap would not apply this year, in a bid to prop up the country’s flagging economic growth.
The steel industry has since gone into overdrive, with output for the second half of this year on track to be the second strongest on record behind 2020, according to Goldman Sachs.
As a result, steel prices have fallen as China has flooded the market. But prices of iron ore, of which China is by far the biggest buyer, have jumped at the same time.
China’s robust demand for iron ore — it has imported 1.1bn tonnes this year, mostly from Australia and Brazil, up 6 per cent on the first 11 months of 2022 — has come despite a sharp drop in demand for property construction, as developers have buckled under the weight of large debt piles. A pipeline of government-backed infrastructure and manufacturing projects has only partially offset the real estate downturn.
