Iron Ore Forecast: Prices May Stay Depressed Despite Upbeat Chinese Manufacturing PMI
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China PMIs, Manufacturing, Iron Ore – Talking Points
- China’s Manufacturing PMI index beats expectations at 50.9 for June
- Iron ore prices fall as steel mills shutter for centenary celebration
- Covid Delta variant may soon put a hit on metal prices if the strain grips Asia
China’s National Bureau of Statistics (NBS) released its purchasing managers’ indexes for the services and manufacturing sectors. The manufacturing index for June crossed the wires at 50.9 versus the consensus forecast of 50.8, according to the DailyFX Economic Calendar. The non-manufacturing figure (services) dropped to 53.5, down from 55.2.
Despite the upbeat figure for the manufacturing sector, iron ore prices – which are heavily dependent on Chinese demand – failed to move higher. The industrial metal ore sold off overnight on reignited fears that Chinese authorities may intervene in markets to cool rising prices. Benchmark 62% iron ore traded around $206.65, down 3.64% on the day.
China’s economic recovery has come into question following conflicting economic signals in recent months. However, the world’s second-largest economy remains on track to see its fastest growth in a decade. The International Monetary Fund’s (IMF) World Economic Outlook projects China’s economy to grow 8.4% this year. The emerging Delta Covid variant, which is thought to be more contagious – may pose a headwind to growth if the virus strain takes a foothold in Asia, however.
In addition to regulatory actions, 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 centenary celebration saw steel mills limit operations on government orders aimed at reducing 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 Chart
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--- Written by Thomas Westwater, Analyst for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.