LAUNCESTON, Australia, Oct 13 (Reuters): Iron ore investors appear to be taking the view that bad news is actually good news, bidding up the spot price even as the property woes afflicting top importer China appear to be worsening.
The somewhat contrarian position is based on the expectation, or perhaps better put as the hope, that Beijing will take steps to firstly stabilise the key sector, and then boost it.
This would lift demand for the steel raw material as China's mills would crank up output to meet the needs of a rebounding property sector, which accounts for about a third of the country's steel demand.
The November iron ore contract in Singapore , the most-active, ended at $112.50 a metric ton on Wednesday, up 1.6 per cent from the prior close of $110.78, which was the lowest since Aug. 30.
The gain in prices came as major Chinese developer Country Garden (2007.HK) became the latest property company to warn that it is unable to meet its offshore debt obligations.
Country Garden joins several other property companies in seeking to restructure debt, with JPMorgan saying that developers accounting for 40 per cent of Chinese home sales have defaulted on obligations since 2021.
Those companies in default, mostly private, have issued around $110 billion worth of high-yield offshore bonds.
Given what appears to be a serious and spreading liquidity crisis in China's property sector, it seems counter-intuitive to bid up iron ore prices. This is especially the case given that Beijing's stimulus efforts so far haven't seen the sector recover, and have furthermore been seen as not boosting other key parts of the economy as much as hoped.
There are also signs that China's iron ore imports may soften in October, although that is most likely related to the week-long holidays at the start of the month.
The last official reading on iron ore imports was August's customs figure of 106.42 million metric tons, which was the highest monthly total since October 2020.
However, since then imports have eased, with commodity analysts Kpler estimating September arrivals at 103.42 million metric tons and October's on track to reach 96.13 million.
LSEG data estimated China's September imports at 95.46 million metric tons and October arrivals at 88.48 million.
While the vessel-tracking and port data by analysts doesn't always exactly align with customs data given differences in when cargoes are assessed as having been cleared, it is highly correlated in determining trends.
A further possible concern for iron ore imports is what policy China will adopt regarding steel production for the coming winter period.
