Copper, iron ore prices hold up despite China trade shock
The price of iron ore held onto recent gains on Friday, despite trade data from top consumer China showing an unexpected drop in April amid growing signs of a slowdown in the world's second largest economy.
The benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin added $0.50 or 0.8% to $60.50 a tonne on Friday according to data provided by The SteelIndex, the highest since March 3.
The Metal Bulletin's 62%-index at the ports of Qingdao-Rizhao-Lianyungang also continued to improve with the price climbing over 1% to $61.40 a tonne. The rally in lower grade ore is even more robust with MB's 58% Fe fines jumping 2.8% to $53.89 on Friday, the highest since end-January.
A rally that began on April 16 seemed to run out of steam last week, but today's advance brings to 29.5% the commodity's gains since the spot price hit record lows at the beginning of April. The price slumped 47% last year and remains down 15% in 2015.
Against expectations of a rebound in April, Chinese exports dropped more than 6%. But the real shocker was imports which plummeted 16.2% according to customs data released on Friday.
Compare to the headline figure the country's iron ore imports remained relatively robust, declining 3.8% year-on-year in April. The country took in 80.2 million tonnes of the steelmaking raw material last month compared with 83.4 million tonnes a year earlier.
April shipments were also lower than that of March but on a year to date basis compared to 2014 is still showing a slight gain. China forges almost as much steel as the rest of the world combined (compared to just 25% of the global total in 2004).
Analysts are warning however that despite the relatively solid demand from China's steelmakers this year, the outlook for the domestic industry remains cloudy.
Expectations have been that imports would grow faster this year as China's blast furnaces make the most of historically low prices, but the modest pace suggests soft domestic demand.
Steel consumption in China fell last year for the first time since 1995 after years of overcapacity and low profitability and a pollution clampdown by Beijing could see as output decline as much as 4% this year. And that's despite soaring steel exports from China, which has jumped by nearly a third so far this year compared to the same period in 2014.
The major exporters are also finding it more difficult to displace high cost Chinese miners who have been granted tax breaks by Beijing to see out the current slump.
Exports from the world's largest iron ore terminal, West Australia's Port Hedland declined by more than a million tonnes in April from March, the lowest since November.
China consumes more than 70% of the world's seaborne iron ore and it also holds a dominant position in the copper trade being responsible for some 45% of world trade in the commodity.
Friday's data showed China's refined copper imports improved in April from March, rising nearly 5% to 430,000 tonnes, but fell 4.4% on a year on year basis. For the first four months of the year copper imports are down a whopping 14%.
Copper futures in New York were last trading at $2.92 a pound, down a fraction on the day. The red metal is up 19% since hitting near-five year lows in January and after a two-week rally is in positive territory for 2015.
China burns half the world's coal, but the vast bulk of that is from domestic mines. April imports of coal fell 26.4% to just under 20 million tonnes from 2014. Year to date China's imports have dropped 38% compared to last year as Beijing targets cuts in coal consumption of more than 160 million tonnes by the end of the decade.
Premium hard coking coal inched up to $85.5 a tonne on Friday according to the Steel Index, but is down 24% so far this year. The price of coal used in steelmaking is trading more than 50% below its peak reached in February 2013.