Why China’s GDP numbers are important for Aussie iron ore miners

January 17, 2022 05:55 PM AEDT | By Aayush

Why China’s GDP numbers are important for Aussie iron ore miners — Image source: Copyright © 2021 Kalkine Media

Aussie iron ore miners will be in focus

China is a heavy consumer of iron ore, all thanks to its massive real estate sector, which contributes roughly 30% to its GDP. Investors will be keenly watching the commodity space, as China’s GDP numbers will be made public soon.

Iron is also seen as a barometer for the Chinese economy. The GDP numbers would set the tone for the price movement of iron ore this week. Analysts are predicting a slowdown in the real estate sector, primarily led by a decreased production of steel, which uses iron as a major component. The property market had already shown signs of a cooldown amid a massive debt crisis looming over China’s Evergrande Group. However, the most indebted property developer managed to extend the deadline for its recent debt payment after negotiating with onshore bondholders.

The bigger concern over faltering steel production is China’s strict emission curbs ahead of the Winter Olympics, forcing steel mills to cut down on its production to comply with norms. Some analysts also believe that it is just a temporary halt, and the production is expected to pick up after the Winter Olympics.

The iron ore price has been rallying since December last year, now trading over US$125 per tonne, as of 17 January 2022. The rise in the price has been supported by heavy rain in Brazil, which made Vale, one of the largest iron ore producers in the world to halt its production, thereby reducing the supply.

Profit margins of local miners such as Fortescue Metals Group Limited (ASX:FMG), Rio Tinto Limited (ASX:RIO) and BHP Group Limited (ASX:BHP) would be impacted big by changes in iron ore prices. The Aussie dollar (AUD/USD) will also be in focus as China releases its Q4 GDP data.

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