The big S&P/ASX 200 Index (ASX: XJO) miners are having a hard time of it on Wednesday.
While the ASX 200 is down 0.56% in late afternoon trade, all three of the big ASX 200 miners are down significantly more.
At the time of writing:
- BHP Group Ltd (ASX: BHP) shares are down 1.44%
- Rio Tinto Ltd (ASX: RIO) shares are down 1.35%
- Fortescue Metals Group Ltd (ASX: FMG) shares down 1.34%
Investors may be hitting the sell button following increasing speculation that China's voracious appetite for iron ore may have peaked.
The ASX 200 miners and China
China is the world's top importer of iron ore, a core steel-making ingredient.
And it was largely thanks to a gradual uptick in Chinese government stimulus, intended in part to boost the nation's flagging, steel-hungry property sector, that iron ore prices rallied from US$100 per tonne in early June to just over US$120 per tonne today.
But many analysts believe that rebound is not sustainable, which would pressure ASX 200 mining shares focused on iron ore, like BHP, Rio Tinto, and Fortescue.
Commenting on the outlook for the iron ore price, Bank of America said (courtesy of The Australian Financial Review), "An improvement in margins is essential, which first requires a rebound in steel prices."
Shorter term, the bank's analysts remain relatively optimistic about the price of the industrial metal, saying:
Keeping in mind that steel mills have cut production of late, while steel inventories are relatively low, China's steel market could rebound in the second half of 2023, and iron ore prices along with it.
But any boost in steel demand isn't expected to last.
Bank of America forecasts that the iron ore price will retrace to US$100 by the end of the year.
Rio Tinto boss flags mature Chinese economy
It's not the fact that China's economy has stopped growing that might see the ASX 200 miners struggle. It's just that the past decade's rapid growth looks, inevitably, to be coming to an end.
That in turn likely means steel demand from the world's most populous nation may have reached its apex.
According to estimates from BHP, China's steel output has likely peaked at the current one billion tonnes per year.
And according to Rio Tinto CEO Jakob Stausholm (quoted by Bloomberg):
We are foreseeing that the peak steel demand in China is about to be reached. Not because the Chinese economy is not growing, but just because of the maturity it has reached.
If the ASX 200 miners are looking for new growth markets, it appears they may need to start looking elsewhere.
