Ground Breakers: Chinese demand for iron ore weakens as virus drags on in Middle Kingdom
- Chinese iron ore imports fall 14.52% YoY in March quarter
- As covid weighs on demand, analysts believe economic growth will support metals through late 2022
- Bill Beament Secures Mining Contractor DEVELOP’s First Client in $400 Million Contract to Operate Bellevue Gold Mine
Should iron ore miners be worried after Chinese iron ore imports plummeted in March?
Traditionally the strongest season for steel production, Covid-19 lockdowns and pollution restrictions around the Winter Olympics and Paralympics led to a massive 14.52% year-on-year drop on the another in March at 87,283 Mt.
During the March quarter, iron ore imports into China fell significantly by 5.2% year-on-year to 268.36 Mt.
It’s not just iron ore that could be driven by weaker commodity demand, with copper prices also heavily dependent on Chinese demand signals.
Capital Economics commodity economist Kieran Clancy says weak imports of a range of commodities could impact high metal prices, particularly copper.
“In any case, the most important story is that recent virus-related restrictions in China appear to be weighing heavily on commodity demand,” he said.
“We expected a more dovish regulatory stance to spur a rebound in Chinese property sales, which is generally positive for commodity demand (especially demand for industrial metals).
“But such a rebound now appears to have been delayed by surging COVID-19 cases, with new home sales in 30 major cities falling sharply in the latest monthly data to their lowest level in more than a decade.”
“In summary, the latest trade data out of China paints a picture of significantly weaker commodity demand. With a recovery in supply, we expect this to drive down the price of copper (and many other commodities) by the end of the year.
However, Shanghai metals market analysts say iron ore demand is expected to increase significantly in April, due to the end of strict restrictions in Tangshan and measures to improve logistics.
“With the improvement of the national pandemic situation, Tangshan, an important steel city, has been unsealed. In addition, relevant departments have also proposed new implementation policies for logistics,” they said.
“Steel mill production will gradually return to its normal level, leading to the sharp increase in demand for iron ore. Iron ore imports are expected to increase significantly in April.
Dalian futures were down 2.4% this morning while the Singapore May contract was down 0.38% at US$151.15/t.
On the copper side of the equation, not everyone is so bearish, with China’s refined copper output up 0.6% in March year-on-year, a positive trend that commodity strategists d ‘ANZ, Daniel Hynes and Soni Kumari plan to sue.
“We expect China’s demand for refined copper to grow 3.2% to 13.6 million tonnes in 2022, compared to growth of just 1.8% in 2021,” they said in a client note.
“Global growth is expected to increase by 2.4%. However, the market is facing further disruption caused by the Russian-Ukrainian war.
Russia is the “world’s fourth largest producer of copper concentrate behind Chile, Peru and China, producing around 5% of the world’s copper concentrate”, ANZ said.
“It is also a major producer and exporter of refined copper, accounting for around 4% of the world’s refined copper.”
“As such, we expect copper inventories to remain near multi-year lows before gradually increasing in the second half of this year. This should provide a solid level of support for copper prices.
Golden day before the long weekend
Large miners appear to be driving the market higher, led by gold producers after prices hit US$1980/oz.
The All Ordinaries Gold Index is up 2.58% today, with Northern Star, Newcrest (ASX:NCM), Firefinch (ASX:FFX), Gold Road (ASX:GOR), Oceanagold (ASX:OGC) and AngloGold Ashanti (ASX:AGG) all in favour.
The gold index is now up 9.76% for the week and 16.92% for the year to date, a much brighter start after the disappointing year of 2021 for precious metals.
Goldies stock price today:
DEVELOP lands its first contract
Bill Beament’s “green” mining services contractor, DEVELOP Global (ASX: DVP), has secured its first deal, a $400 million contract to mine Bellevue Gold’s namesake high-grade underground gold mine ( ASX:BGL) to WA.
This fits with the ESG-friendly outlook that Beament unleashed at Diggers and Dealers last year, after serving as the iconoclastic boss of Australia’s second-biggest gold miner Northern Star Resources (ASX:NST).
The previously reported bidding win oddly brought Beament back to familiar territory in the gold space after declaring ‘gold isn’t green’ in what the Wild Diggers revealed. ‘last year.
The vision was based in part on the belief that underground mining generates fewer emissions than surface production, and Bellevue has already planned to market its bullion as “green gold” with an ambitious 2026 deadline for achieve net zero of its operations.
“It’s a huge opportunity for both companies,” he said. “Bellevue is an exceptional gold asset with excellent production prospects and low all-in sustaining costs in the heart of WA,” Beament said.
“This is one of the biggest contracts in Western Australia’s gold mining industry. It is also one of the most environmentally ambitious projects, with the aim of producing Australia’s first carbon-neutral gold.
“I am confident that applying the combined skills and experience of the Bellevue and Develop teams to this exceptional asset will ensure strong returns for all stakeholders.”
For Beament, he returns to the environment that propelled him to stardom, as an underground manager for mining contractor Barminco, and he tapped some household names to run his first job at DEVELOP, which also owns copper-zinc mines in WA and New South. Wales.
Paul Nilsson and Aaron Armstrong, who have experience in senior management positions at Northern Star and Barminco, are on board as underground mining manager and maintenance manager, respectively.
Jordan Hall, who spent 19 years at Byrnecat, including Golden Grove and NST’s Jundee gold mine, was hired as project manager for the Bellevue gold mine.
This comes at a time when competition for labour, and particularly skilled workers, is fierce in Western Australia’s mining sector.
DEVELOP Global (ASX:DVP) & Bellevue Gold (ASX:BGL) share price today: