Japan iron ore market
Japan accounts for 10% to 13% of the seaborne market. So Japanese iron ore imports give good indications for iron ore demand in an important market.
Japan’s Ministry of Economy, Trade and Industry releases the data for Japanese iron ore imports on a monthly basis. Japanese iron ore imports are almost unchanged year-to-date (or YTD) on weak domestic demand. Imports were 11.8 million tons, which was down 2% YoY.
Japan has not taken advantage of lower iron ore prices, which are down ~40% YTD. Japan’s steel output is also down 9.3% month-over-month and down 5.6% year-over-year in July. Automobile production, which is quite important to Japanese steel demand, fell 1.7% in August year-over-year.
The bottom line
All the above data points show negative demand trends for iron ore in Japan. Weak demand from major consumers like China and Japan is putting pressure on iron ore prices, which are down 40% YTD. It’s also negatively impacting iron ore names engaged in the seaborne trade— like Rio Tinto (RIO), BHP Billiton (BHP), Vale SA (VALE), and Cliffs Natural Resources (CLF).
A broader approach for participating in this trend without picking individual companies would be to look at the SPDR S&P Metals and Mining ETF (XME).
To read more about the iron ore industry and the iron ore players, see Market Realist’s series Must-know: An overview of the iron ore industry.