Prices could remain depressed despite bullish Chinese manufacturing PMI
China PMI, Manufacturing, Iron Ore – Talking Points
- China’s manufacturing PMI exceeds expectations at 50.9 for June
- Iron ore prices drop as steel mills close for centennial celebration
- Covid Delta variant could soon impact metal prices if tension grips Asia
China’s National Bureau of Statistics (NBS) has released its purchasing manager indices for the service and manufacturing sectors. The June manufacturing index crossed the line at 50.9 against a consensus forecast of 50.8, according to the DailyFX Economic Calendar. The non-manufacturing (services) figure fell to 53.5 from 55.2.
Despite the optimistic figure from the manufacturing sector, iron ore prices – which are heavily dependent on Chinese demand – have not risen. Industrial metal ore sold overnight amid heightened fears that Chinese authorities could intervene in the markets to curb price increases. The 62% benchmark iron ore traded around $ 206.65, down 3.64% on the day.
China’s economic recovery is in question following conflicting economic signals in recent months. However, the world’s second-largest economy remains on track for its fastest growth in a decade. The International Monetary Fund’s (IMF) World Economic Outlook projects China’s economy to grow 8.4 percent this year. The emerging Delta Covid variant, which is considered to be more contagious – may, however, be a barrier to growth if the viral strain takes hold in Asia.
In addition to regulatory measures, ferrous metals, including iron ore, have come under pressure from the Chinese government as the country prepares to celebrate 100 years under communist rule. The centennial celebration saw steel mills curtail their operations on government orders to reduce pollution around Beijing and Shanghai. Anniversary celebrations will continue throughout the week. That said, iron ore prices may not recover until next week.
Iron Ore Daily Graph
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TRADE RESOURCES of iron ore
— Written by Thomas Westwater, Analyst for DailyFX.com
Contact Thomas, use the comments section below or @FxWestwateron Twitter