China Casts Doubt On Iron Ore Prices

By Chad Fraser — Exclusive to Iron Investing News

China Casts Doubt on Iron Ore Prices

Iron ore prices continued to rise steadily last week as traders pushed the mineral to new six-month highs. However, prices look set to head lower on fears that China's economy could continue  to slow in the coming months. China is the world's top iron ore consumer, accounting for 60 percent of global demand.

According to the Steel Index, iron ore with 62 percent iron content was trading at $149.40 a tonne on Friday, up 7.9 percent since the beginning of 2012 after a 35 percent plunge in late 2011, when the Chinese government introduced measures to slow the country's property market.

Traders were taking their cues from a new report from the China Iron and Steel Association (CISA), which on April 11 reported that the country's average daily crude steel output rose twelve percent in March to 1.904 million tonnes.

Still, that's down slightly from the 1.923 million tonnes a day that China produced in March 2011, when mills stepped up production to supply a building boom.

Latest Chinese economic figures have traders in “wait-and-see” mode

However, much of that optimism disappeared on last Friday, when China's latest economic figures were released. In the first quarter, the country's economy grew at a rate of 8.1 percent. That's still a strong growth rate, but it's down from 8.9 percent in the previous quarter and short of the 8.3 percent that analysts were expecting.

That deceleration may continue according to Ardo Hansson, the World Bank's lead economist for China, who commented, “China's gradual slowdown is expected to continue into 2012, as consumption growth slows somewhat, investment growth decelerates more pronouncedly and external demand remains weak.”