The one commodity that should be getting hammered by China’s worsening property crisis is actually doing rather well. Iron ore climbed to its highest in a month last week after a rally that has defied deepening gloom over China’s debt-laden economy. Prices have largely kept above the key $100-a-ton threshold this year despite waves of worrying news from the real estate sector, which in more normal years makes up about 40% of demand.
The one commodity that should be getting hammered by China’s worsening property crisis is actually doing rather well.
“Iron ore is still very resilient for an environment like this, and I think Chinese demand is playing a role in that,” said, chief economist at Grow Investment Group. It shows parts of the economy, outside the property sector, are relatively healthy, he said. BHP Group, the world’s second-biggest iron ore producer, said it’s seeing “solid demand from infrastructure, power machinery, autos and shipping, offsetting weakness in new housing starts and construction machinery.” Consultancy Kallanish Commodities adds “white goods” to that list, a category that includes products like fridges and washing machines.
Research firm Mysteel said demand for heavy plate used in ships, bridges and wind turbines rose 8.1% in the first five months of the year. The product accounts for about 10% of Chinese steel demand. Other categories covering construction, machinery, appliances and cars were flat or slightly lower. Iron ore has been helped by cuts at electric arc furnaces that use scrap — an alternative production method for steel. That’s helped keep output derived from iron ore relatively robust. Average daily production of molten iron from blast furnaces has reached its highest since 2020, according to Mysteel.
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