Iron ore prices slump 6.0% over China’s downbeat imports
|- Iron ore Futures in China dropped 6.0% as demand from the largest user deteriorates in April.
- Global growth fears, a firmer USD also weighs on the commodity’s prices.
Iron ore prices on the Dalian Commodity Exchange not only fail to extend Friday’s corrective pullback but also drops more 6.0% while taking offers towards $124.00 heading into Monday’s European session.
The metal’s latest weakness takes clues from the downbeat China trade numbers. “China's April iron ore imports fell 1.4% from a month earlier, official customs data showed on Monday, as overall purchases were impaired by lean demand at mills while the pandemic situation still disrupted shipments,” said Reuters.
Worsening covid conditions in China drown commodity demand from the world’s biggest customer. The latest activity restrictions in Beijing and Shanghai, the dragon nation’s major cities, weigh on investor sentiment and commodity prices.
Other than China-linked demand fears, the broad strength of the US dollar and global economic woes, mainly due to the spiraling inflation and geopolitical tussles between Russia and Ukraine, also weigh on the Iron ore prices. Furthermore, increasing odds of the Fed’s faster/heavier rate hikes also underpins the US dollar, which in turn has an inverse relationship with the iron ore prices.
To sum up, the short-term outlook for the metal remains bearish considering pessimism for China and the global economy, as well as hopes of faster monetary policy normalization. It should be noted, however, that Friday’s US Consumer Price Index (CPI) for April will be crucial data to watch as the Fed has recently rejected odds of heavier rate hikes.
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