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Russell: Iron ore is a very different story from the China tariffs pain narrative

The United States has imposed massive tariffs on Chinese goods, and the Chinese economy faces a huge blow. However, the commodity that is most vulnerable is not affected.

China is most exposed to iron ore, as it buys over 70% of the seaborne volume, which it uses for just under half of the global steel.

Iron ore prices have remained relatively stable since U.S. president Donald Trump began his trade war with China. The United States now imposes tariffs of up to 145% on China, its biggest trading partner.

On Wednesday, iron ore contracts on the Singapore Exchange closed at $99.35 per metric ton. This is after they had risen from a low of $96.20 per metric ton that was reached on May 1.

Since October, the price has traded in a relatively small range. The high was $110.55 at the beginning of that month and low was at the beginning of May.

China's iron ore imports have also slowed slightly. Customs data shows that first quarter arrivals were down 7.8% compared to the same period last year, at 285.31 millions tons.

While this figure may seem low, it is largely due to weather conditions in Australia that cut off shipments by China's largest supplier.

China's port stocks are a clear indication of the supply disruption SteelHome data shows that they dropped to a 14 month low of 133.8 millions tons during the week ending April 25.

Stockpiles reached 147.5 million tonnes in mid-February. This shows that steel mills are using their inventories to continue production during the period when supply from Australia is disrupted.

Analysts Kpler expect China's imports to have recovered from March, when they recorded 93.97 millions tons.

China's steel production is also stable, with the 92.84 millions tons produced in March representing a 10-month-high and a 4.6% increase from the same period in 2024.

Overall, the iron ore market has been relatively stable this year. Any import weakness can be attributed to disruptions in supply. China's demand is also fairly steady.

Iron ore imports should also be expected to continue beyond April if China's stocks are to reflect the normal seasonal build-up leading into the summer steel peak in the north.

DEMAND FOR STEEL

If there is such concern over the negative impact on China of U.S. Tariffs, then why are iron ore, and steel, holding up? Are they about to decline in price?

Answer: A large part of China's demand for steel is found in industries less exposed to international trade.

Property and infrastructure are the two largest steel-consuming industries, accounting for almost 60% of total demand.

The property market has been struggling in recent years. However, early signs suggest that Beijing's stimulus measures are beginning to stabilize it.

Machines, automobiles and household appliances are the trade-exposed segments of steel demand, accounting for almost a third.

Even here, China's exports are not primarily destined for the United States. Instead, the majority of vehicles and machinery is shipped to Asia, Europe and South America.

The United States is more exposed in the manufacturing of toys, clothing, and other items that do not use much steel, but rely more on chemicals, plastics, and rubber.

The official purchasing managers' (PMI), which measures the level of activity in the private sector, fell to 49.0 in April from 50.5 in march.

Beijing's recent stimulus measures were likely also influenced by the PMI slump, as they announced on Wednesday a reduction in interest rates and an increase in liquidity.

It's clear that some parts of China are feeling the pain from the tariffs, but other parts are doing well.

Beijing's message is geared towards positives, but the U.S. administration is more likely to hear the story of pain.

These are the views of a columnist who writes for.

(source: Reuters)