MARKETS SPECTATOR: China bears grow stronger
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The China bears just got more ammunition. So did those who predict a slump in demand for Australia’s iron ore by Chinese steelmakers.
An initial indication of China’s economy in April today showed weakness. The HSBC China Purchasing Managers Index showed growth fell to 50.5 in April compared with a final reading of 51.6 in March. This number comes on top of last week’s GDP number for the world’s second-largest economy in the three months to March 31 of 7.7 per cent. That’s down from 7.9 per cent in the fourth quarter 2012.
What this means for iron ore miners is that the price of the commodity may sooner or later begin to fall from its current level of about US$136 a tonne. UBS is sticking to its forecast of US$80 a tonne in the third quarter. UBS analyst David Cassidy acknowledges the iron ore price is currently “resilient”. But Cassidy says while Chinese steel production is good iron ore inventory is building.
At 1448 AEST, shares in the world’s biggest iron ore producer Rio Tinto shares had fallen $1.03, or 1.9 per cent, to $54.09. BHP Billiton shares were down 36 cents, or 1.1 per cent, to $31.36. Fortescue Metals Group stock had slid 6.5 cents, or 1.7 per cent, to $3.755 and Atlas Iron shares were down 3.5 cents, or 3.9 per cent, to 87.5 cents.
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