A new disappointment with China brings down shares in the mining and steel sector and also the Ibovespa, which registered a drop of more than 1% this Thursday (17).
Industrial metals from copper to iron ore fell on investor doubts that China’s latest moves to strengthen the property market will be enough to boost construction activity.
At 10:30 am (Brasília time), Vale (VALE3, R$ 61.05, -2.07%), CSN Mineração (CMIN3, R$ 5.84, -1.04%), Usiminas (USIM5, R$ 6 .08, -1.46%), Gerdau (GGBR4, R$ 17.99, -1.48%) and CSN (CSNA3, R$ 11.79, -1.26%) recorded a drop of at least 1 % in this trading session.
Iron ore futures fell more than 5% to trade below $100 a tonne in Singapore, while tin, zinc and nickel marked declines for non-ferrous metals on the London Metal Exchange.
China will expand a program to support the completion of unfinished housing projects to 4 trillion yuan ($562 billion), Housing Minister Ni Hong said at a briefing on Thursday. That almost doubles the scale of spending as Beijing tries to ease the housing crisis, but investors expected more.
“Real estate policies are focused on resolving the backlog of housing stock, which really doesn’t help much with steel demand in the short term,” said Zhou Minbo, an analyst at GF Futures Co.
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Iron ore had recovered from a two-year low below $90 in late September to above $110. But prices fell as a series of government economic policy briefings fell short of expectations. China’s economy is still under pressure, with its third-quarter growth likely at its weakest pace in six quarters, according to a Bloomberg survey.
Investors are placing a lot of expectation on the government’s stimulus announcements, said Han Jing, an analyst at SDIC Essence Futures Co. There has been a clear change in policies, but the scale and pace will become clear more gradually, he said.
Expectations for fiscal stimulus in China were dashed after the Ministry of Finance failed to expand beyond existing credit support to property developers completing unfinished construction projects, said Cameron Law, commodities analyst at Navigate Commodities.
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“We remain highly skeptical of the net positive contributions these measures will have on Chinese steel and underlying iron ore consumption in the medium term as new construction projects, which are the main driver of steel demand, will continue to be kept on a short leash,” said Law.
Iron ore has fallen more than 25% this year, and the pressure is not just coming from weaker Chinese demand. The relatively strong supply was highlighted by quarterly production counts from the three big miners this week, with Vale (VALE3) raising its output to the highest level since 2018.
Iron ore futures were trading down 4% at $100.60 a tonne at 12:36 pm London time. Copper was 0.5% lower at $9,514 a tonne on the LME, having previously hit a three-week low of $9,435.50 a tonne. Tin fell 2.4%, while nickel and zinc were more than 1% lower.
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(with Reuters and Bloomberg)
