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The realization that China’s property bust is beginning to look semi-permanent isn’t welcome for big miners, which have long fed off the country’s housing demand. But although China is starting far fewer new apartment blocks these days, it is building lots more of other metal-intense things like electric vehicles and windmills.
That fact, along with supply discipline from the big iron-ore miners, has kept things from being even worse.
Even so, miners’ headline results released this week weren’t pretty. Rio Tinto’s full-year net profit was down 19% year-over-year, the miner said Wednesday, thanks in part to a drop in aluminum prices. BHP’s first-half underlying profit, after stripping out one-time charges, including a big nickel asset write-down, was largely flat. Both miners announced dividend cuts. Rio Tinto’s full-year underlying earnings were down 12%.
There were some bright spots, however. Indicators of China’s copper demand growth, particularly imports of copper ore and concentrate, still look solid—no surprise given the huge EV and green-power boom. Imports of copper ore and concentrate, in metric tons, were over 20% higher last quarter than in the first quarter of 2021, before the real-estate bust hit metals demand.
Even imports of iron ore were 7% higher, according to figures from data provider CEIC. Given the scale of the property disaster, that is surprisingly strong.
One reason: While the housing market meltdown in China could take a long while to fix, steel demand is getting a boost from manufacturing and infrastructure. The property market made up only 27% of China’s finished steel demand in 2023 versus 34% in 2019, according to Rio Tinto. China’s iron-ore imports hit a record of 1.18 billion metric tons in 2023, Rio says. China produced about 1.02 billion metric tons of crude steel last year, flat from a year earlier, official data from the National Bureau of Statistics shows, steadying after two years of decline.
Weak supply growth for iron ore has also helped support prices. ANZ says steel demand from China’s property sector was down 15% from 2022 levels last year, and its total demand grew just 0.5%. But the bank thinks that global iron-ore shipments probably fell last year too. That wouldn’t be surprising, since the gathering storm clouds in China have been obvious to everyone, including the big miners, for some time now.
Iron-ore prices actually ended the year up around $30 a metric ton, according to data from CEIC, despite a near-interrupted stream of bad news out of China since midyear. The dribble of policy support from Beijing, most recently a big cut to the benchmark five-year loan prime rate, may also lend some modest support to steel demand at the margin.
The huge jump in Chinese copper concentrate imports since 2021 shows where the future is. But even with the China housing-led iron ore boom over, China and the world will still need steel.