Iron-ore prices deepened a two-month slide on Tuesday, dropping to their lowest levels since November as weaker housing data for China fueled concerns over the world’s second-largest economy and demand prospects for the raw material.
The futures contract price for one metric ton of iron ore on the Dalian Commodity Exchange fell more than 4% to Rmb478.5 ($69.45) at one point Tuesday in Asian trading, an intraday low not seen in roughly five months.
“We expect to see the dynamism of [China’s] GDP growth decline in the next quarters, particularly because of the attempts to combat the property market bubble, said Carsten Fritsch and the commodities team at Commerzbank, in a note.
Price growth for new housing in China slowed to a year-on-year rise of 11.3% in March, pulling away from the near-term peak of 12.6% hit in November.
That report followed upbeat economic news issued Monday. It showed an annual growth rate for the Chinese economy of 6.9% in the March quarter, the strongest quarterly performance in 18 months.
But in a tweet Tuesday, Allan von Mehren, chief analyst at Copenhagen-based Danske Bank said iron-ore prices are worth watching for clues to a potential China slowdown:
— Allan von Mehren (@Avonmehren) April 18, 2017
“Record stockpiles and signs of slowing steel demand … is currently doing the damage” to iron-ore prices, said Ole Hansen, head of commodity strategy at Saxo Bank. And speculative traders haven’t helped on the Dalian Commodity Exchange, “where the falling price has been met by rising open interest (increased short selling).”
Taking on a broader view, Hansen pointed out that while the link to global growth is not as strong as it used to be, “the market still tends to look at falling metal prices as a sign of slowing growth, and any investor will take note of that, considering the potential impact on stocks and central bank behaviour,” he said.
“Industrial metal demand remains heavily dependent on Chinese demand,” he said. There’s also the “fading ‘Trump trade’” to consider, with the U.S. president’s “infrastructure plan, so far, being stuck in the long grass.”
Miners suffered in London trade, with shares of iron ore heavyweights Rio Tinto
and BHP Billiton
falling 3.8% and 5.6% respectively, contributing to a sharp fall by the FTSE 100 stock index
Rachel Beals and Barbara Kollmeyer contributed to this report