China worries hit iron ore price

Rather than being an issue of oversupply, which has been an ongoing story for iron ore in recent history, the most recent bout of weakness is more closely correlated to a weak property market in China, Deltec chief investment officer Atul Lele said. "The property sector in China has been quite weak, given residential property accounts for about 24 per cent of fixed asset investment in China, it’s understandable that weakness in the property sector is feeding through to weakness in the iron ore price," Mr Lele said.

In June, the price of iron ore hit $US89 per tonne, but was then helped by the introduction of target stimulus packages from the Chinese government, however Me Lele said that this time it is unlikely that there will be that safety net. "There’s no prospect of stimulus, especially given China has been benefiting from the export upswing over the past few months and the PMI numbers have been relatively good up until the latest HSBC data point," Me Lele said.

Atlas Iron and Arrium are next in the firing line with cash costs over $US80 per tonne. "These companies have to start to reconsider some of their ongoing assumptions with regards to the ongoing viability of their projects because you can dip below an economic price for a couple weeks, but if it starts to go below, then back above, then back below, that makes your capital spending and economics of your project more difficult to assess," Mr Lele said. 3 Hotel mogul Jerry Schwartz wants a helipad for … 5 Pacific Brands to sell King Gee, Hard Yakka workwear …

Read more here: SMH


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