LAUNCESTON, Australia, March 19 (Reuters) – China’s iron ore and steel markets appear to be taking a risky bet that Beijing’s yet-to-be-announced stimulus measures will be enough to offset a looming global recession as the coronavirus spreads across the world.
But there is an increasing risk that they may be having a Wile E. Coyote moment, the one where the hapless Road Runner-chasing cartoon coyote goes over the edge of a cliff and hangs in midair until he realises he is about to plummet into a deep canyon.
Iron ore, Shanghai steel futures and Australian coking coal have up until now been sharing something that is increasingly at odds with virtually every other commodity, namely that their prices have held up in the face of mounting economic gloom.
Benchmark 62% iron ore for delivery to China MT-IO-QIN62=ARG, as assessed by commodity price reporting agency Argus, ended at $90.15 a tonne on Wednesday, down slightly from the previous close of $90.40.
The steel-making ingredient is little changed on a year-to-date basis, having lost just 1.1% so far in 2020. It’s also well above the low of $79.85 a tonne, hit on Feb. 3 just as the Chinese economy was being largely shut down to stop the spread of the coronavirus from its epicentre in the city of Wuhan.