Via Metal Miner
In the end, China exceeded market expectations, posting a 5.2% year-on-year growth on July 14 compared to the market forecast of 5%. According to the economic data released by the National Bureau of Statistics, strong trade and industrial production helped to propel growth, indicating that China has braved the tariff war unleashed by the United States. Meanwhile declining steel prices seem to indicate
It was this very expectation of a 5% growth in Q2 that iron ore traders were banking on. In the days leading up to the release of the Q2 data, iron ore wrangled its biggest weekly gain since January this year. This came as presumptuous traders bet on the positive reporting of the second-quarter economic growth by the world’s largest metals-consuming nation.
Last Monday, the future prices of this steel raw material rose to as high as $99.90 a ton after surging 3.6% the previous week. Following the biggest gain in recent months, the ore futures market continued to rally. Singapore iron futures hovered near the US $99.30 ton mark while the yuan-dominated contracts on the Dalian exchange advanced. This contrasted with a decline in steel futures on the Shanghai markets.
The script was slightly different when markets opened on Tuesday. Following the release of China’s economic growth data, markets saw a significant dip. As weak property sector data from China dented market sentiment, benchmark 62% iron ore futures fell. Futures on the Singapore Exchange dropped toward $105 per tonne, with Dalian prices also retreating.
By the end of Tuesday trading, iron ore futures had fallen by 1.6%, indicating slowing demand from steel companies. In Singapore, ore price settled at US $98.92 per ton, down by 0.7%. Meanwhile, according to this report, Dalian (yuan-based) and Shanghai (steel contracts) also reported a decline in futures rates.
As revealed in the new set of economic data, declining steel prices could be a direct fallout of sharper-than-expected slowdowns in fixed-asset investment, retail sales and falling property prices. In June, new home prices in China fell for a 12th consecutive month. There’s also concern that a slowdown could be on the way, even though Beijing claims its economy is on track.
Incidentally, much of the rally in iron ore futures last week was due to anticipation that China would announce schemes to boost the ailing property sector and counter industrial overcapacity. While the former did not happen, the data released contained some indication that the latter may still be in the works.
