Importance of iron ore imports
Aside from being the number one consumer of coal, China is also the world’s top iron ore consumer. China imports almost 60% of the world’s seaborne iron ore. In 2014, China imported 932.5 million tons of iron ore, 13.8% more than in 2013. Iron ore and coal each account for nearly 30% of the world’s dry bulk trade volume.
Iron ore imports
China’s iron ore imports declined for the second straight month in February 2015, down 13.5% to 67.94 million tons over January 2015. Yet compared to a year ago, imports were up 11%. In its drive to fight the anti-pollution battle, the country’s government has threatened to close down more steel mills and thus reduce demand furthermore.
“Steel demand in China slowed in February as some steel mills cut their output level amid economic downturn pressure,” said Hu Xiaodong, an analyst with Nanhua Futures in Hangzhou. He added that “construction activities were suspended during the holiday, which dampened the iron ore demand from overseas suppliers. Ore inventories at major ports in China were also staying at a relatively low level.”
According to a report by Reuters, the China Iron and Steel Association says, “Steel demand is expected to pick up when the weather gets warmer, but given high ore stockpiles at major ports in China, weak fundamentals will continue to weigh on iron ore prices.”
Dry bulk shippers such as DryShips (DRYS), Diana Shipping (DSX), Navios Maritime Holdings (NM), and Safe Bulkers (SB) that haul key dry bulk materials such as iron ore, coal, and grain across the ocean are directly affected by commodity imports data. With imports down, the effect will be negative.
The SPDR S&P Metals and Mining ETF (XME) invests in industries such as steel, coal and consumable fuels, gold, precious metals and minerals, aluminum, and diversified metals and mining.