• China iron ore trade data sends prices higher
  • Iron ore now back near US$110/t, after dropping below US$100/t last month
  • Materials and energy sectors lift in morning trade

If you thought China’s steel complex was in a spiral, think again.

The Communist superpower’s commodity trade data for May is out and it is good news for anyone sitting on red dirt.

China swallowed up 96.17Mt of iron ore in May, up 6.34% MoM and 3.95% YoY, while steel exports rose 5.34% MoM and 7.69% YoY to deliver a little bump to the flagship Aussie commodity.

It came despite putrid steel prices and the fact China’s steel factories, accountable for almost 60% of global production and around four-fifths of Aussie iron ore exports, were in Rick Ross’ parlance Blowing Money Fast by keeping the lights on.

ANZ commodity strategists Daniel Hynes and Soni Kumari say iron ore imports should remain resilient due to low stock levels at mills, despite poor demand for steel from an under pressure property market.

“Iron ore imports saw a surprise increase to 96mt despite narrowing steel mill profitability,” they said in a note.

“Declining port inventories encouraged more shipments. Steel mill utilisation rates are improving, with a rebound in daily steel output.

“Despite a downbeat steel-demand outlook, iron ore imports are likely to be resilient due to recent destocking by mills.”

Coal imports also surged over 90% year on year to 39.58Mt, despite increasing stockpile levels.

“The lifting of the ban on imports of Australian coal, the zero-import tariff and lower prices have supported a higher number of shipments. That said, we expect imports to level-off as inventories at ports and power plants fill.”

That data led seaborne iron ore prices to a 3% lift yesterday, up to US$109.55/t, with nickel, aluminium and zinc also rising.

It continues a strong run for iron ore this week, which is so far pushing back against calls from investment banks that a slide to well below US$100/t could come in the next three months.

Cf. Goldman.


What does that mean for the market?

For the materials sector it means a 0.54% gain this morning with all of the Pilbara majors in the green, led by Rio Tinto’s (ASX:RIO) 1.93% rise.

South32 (ASX:S32) was another strong performer, up 1.76%, while higher energy prices saw that sector lift 2.19%, led by coal’s Whitehaven (ASX:WHC) and Yancoal (ASX:YAL), up 5.21% and 3.44% respectively.

Gold stocks fell like a tonne of bricks though as prices dropped 1.1% to US$1940/oz. Experts say a surprise rate hike from the Bank of Canada was at fault.

“Gold is getting crushed as the bond market signals rate hiking cycles are not ready to end. ​ The Bank of Canada rate decision sent a shiver down the spine of most gold bulls as they are the leading central bank when it comes to action since COVID-19,” OANDA senior market analyst Ed Moya said.​

“The BOC was the first major bank to hike and hold, which means today’s message that more hikes are coming is resetting many peak terminal rate bets.

“Gold is facing critical support at the $1950 level and if that breaks, bearish momentum could eye the $1935 region.”


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