Monsters of Rock: China bulls send iron ore, copper flying

Chinese stimulus speculation continues to send bulls racing back to resources
MinRes soars, up over 30% for the week as lithium, copper and iron ore catch China bounce
Short term iron ore fundamentals improve slightly in China, prices 14% up in a week on hopes of real estate industry support package

There are few places other than resources to look for market joy than resources today, with punters fed up with doom and gloom latching on to positive wires to send materials stocks soaring.

Where are those wires from? China, of course, where the Politburo has reportedly said it wants to back in declining real estate firms who have unceremoniously dragged its economy into a hole in recent months.

That’s come from State mouthpiece Xinhua no less.

The LME’s three month copper contract is now at US$10,080.50/t, 6.4% higher since news of the first stimulus package broke.

Iron ore is at US$102.35/t, 3.89% up in Singapore today and 14.4% higher since Monday.

We’re now seeing quite remarkable one day and one week moves in Aussie mining stocks, with large caps showing the sort of wheels reserved for minnows shopping pXRF rock chips grading 30% copper and 10% kangaroo dung.

Mineral Resources (ASX:MIN), purveyor of lithium, iron ore and cringeworthy PR content, was up 13% for the day and 35% over the past week.

Rising commodity prices will help address the miner’s debt levels, with the company also recently closing the $1.3 billion deal to sell 49% of the haul road at its new Onslow Iron project to Morgan Stanley.

Lithium prices are yet to move materially, as noted in our High Voltage column this morning, but sentiment is on the up after battery maker CATL was revealed this month to be curtailing production from a mine in Jianxi supplying around 8% of China’s domestic lithium tonnage.

Behind MinRes, fellow lithium miner Pilbara Minerals (ASX:PLS) was up 6.35%, with the iron ore triumvirate of Fortescue (ASX:FMG), BHP (ASX:BHP) and Rio Tinto (ASX:RIO) rose 4.64%, 3.14% and 3.04% respectively.

Smaller lithium stocks saw outsized gains, with Liontown Resources (ASX:LTR) up ~9%, Arcadium Lithium (ASX:LTM) 5.6% higher, IGO (ASX:IGO) 5% better off.

Copper and gold stocks saw comparatively mild gains, with a handful of goldies in loss-making territory, though De Grey Mining (ASX:DEG) was up close to 4% after batting off speculation Canadian giant Agnico Eagle had dropped an offer for the company and its $1.3bn Hemi gold mine, first reported in The Australian’s Dataroom column.

Fundamentals or fun-damentals?

Like Lionel Hutz selling a house, there are any number of ways to spin numbers from the coal front.

When it comes to iron ore, it’s easy for bulls and bears to pull numbers that suit their thesis.

The big iron ore miners have largely maintained a united front on the theory the volume of marginal supply in the market since Vale pulled tonnes following 2019’s Brumadinho dam disaster keeps prices supported at US$80-100/t.

Naysayers think property, the engine room of China’s exploding steel sector in the early 21st century, is so stuffed the only way is, eventually, down.

There have been some promising indications in the past week or two on the demand side in China, producer of close to 60% of the world’s steel and purchaser of around 80% of its seaborne iron ore.

MySteel says portside stocks in China have finally begun to whittle down, falling 1.7% on the week to September 25 to 150.5Mt, a third consecutive weekly drop.

Four idled Chinese blast furnaces came online in the past week, with capacity utilisation at 247 steel producers sampled by MySteel up 0.39% on the week to 84.45%.

It’s the fourth consecutive week of usage increases, according to MySteel. Profit margins have been improving, prompting mills to exit maintenance periods.

But their operational rate remained unchanged at 78.23% and it’s worth noting the industry often gets busy in this period, especially with iron ore purchases.

There can be some short-term aberrations about this time of the season, as mills stock up before the country goes dark for its National Day Holiday from October 1-7.

The ASX materials sector closed the day up 2.67%.