Japan’s iron ore market
Japan accounts for 10%–13% of the seaborne market. So, Japanese iron ore imports are another good demand indicator.
Japan’s Ministry of Economy, Trade, and Industry releases data for Japanese iron ore imports on a monthly basis. Japanese iron ore imports totaled 11.03 million tons in January—compared to 12.05 million tons in December. This is a decline of 8.5% month-over-month and 9.1% YoY (year-over-year).
This depicts weak demand in Japan. The country is already grappling with deflation.
For full-year 2014, Japan imported 136.44 million tons of iron ore. This was a 0.5% increase from 2013. So, iron ore imports in 2014 remained more or less flat.
Japan hasn’t taken much advantage of lower iron ore prices. Iron ore prices were down about 49% in 2014. The overall picture indicates negative to moderate demand for iron ore in Japan.
Weak demand from major iron ore consumers is putting more pressure on iron ore prices. It also negatively impacts iron ore companies in seaborne trade—including Rio Tinto (RIO), BHP Billiton (BHP), Vale SA (VALE), and Cliffs Natural Resources (CLF).
Lower demand also affects funds like the iShares MSCI Global Metals & Mining Producers ETF (PICK). BHP Billiton and Rio Tinto make up 29.5% of PICK. The SPDR S&P Metals & Mining ETF (XME) also invests in metal and mining companies.