Can China’s Iron Ore Imports Rescue Iron Ore?
Why Analysts Aren't Sold on Iron Ore's Recent Price Rally
China’s iron ore imports
In March 2016, China’s iron ore imports came in at 85.8 million tons. This was a rise of 6.5% compared to 80.5 million tons in March 2015 and 73.6 million tons in February 2016.
Iron ore imports in the first three months of 2016 were 241.6 million tons, 6.4% higher than in the same period last year. The recent price rally in Chinese steel prices is the main reason for the buoyant iron ore imports.
Customs data and China’s iron ore imports
Chinese customs data track the country’s iron ore imports. This is important for investors, because the data give a good sense of the appetite for imported ore among Chinese mills and traders. China consumes about two-thirds of seaborne iron ore.
Therefore, China’s import appetite impacts iron ore players involved in the seaborne iron ore trade. These players include Cliffs Natural Resources (CLF), Vale (VALE), and Rio Tinto (RIO).
The iShares MSCI Global Metals & Mining Producers ETF (PICK) invests in iron ore, so the data affect it equally. BHP Billiton (BHP) is PICK’s top holding, making up 16.7% of the fund. The SPDR S&P Metals & Mining ETF (XME) also invests in some of these stocks.
Seasonal demand uptick
Seasonal demand uptick has been a major contributor to the current elevated steel and iron ore prices. However, the rally to be sustainable must be supported by an improvement in demand fundamentals.
In the next part of this series, we’ll see what’s supporting the current trend in iron ore imports in China and whether it’s sustainable in the long term or not.
Browse this series on Market Realist:
