Japanese iron ore imports decline in 1H15
Japan accounts for 10%–13% of the seaborne market, making its iron ore imports a good indicator of iron ore demand. Japan’s Ministry of Economy, Trade, and Industry releases data for Japanese iron ore imports on a monthly basis.
Japan’s iron ore imports totaled 10.5 million tons in June, compared with 9.6 million tons in May. However, this is a decline of 2.7% year-over-year. For the first half of the year, Japanese imports declined by 3.2% compared to the same period last year. Japan’s steel production also remained weak in June. Production declined 4.0% month-over-month and 6% year-over-year to 8.6 million tons. Most likely, the plunge in iron ore imports is due to the cuts in steel production.
The impact on investments
China’s weakening demand is already suppressing iron ore prices. This weakness, coupled with lackluster demand from other major customers—including Japan—could lead to significant pressure on iron ore prices. It also negatively impacts iron ore companies in seaborne trade, including Rio Tinto (RIO), BHP Billiton (BHP) (BLT), Vale SA (VALE), and Cliffs Natural Resources (CLF).
Lower demand also affects funds like the iShares MSCI Global Metals & Mining Producers ETF (PICK). Together, BHP Billiton and Rio Tinto account for 30.4% of PICK. The SPDR S&P Metals & Mining ETF (XME) also invests in metals and mining companies.