On Monday, Australian mining stocks fell sharply as concerns over China's economic direction and potential trade war risks weighed on the market. The recent $2.5bn (12 trillion yuan) stimulus package from China’s Standing Committee of the National People’s Congress disappointed investors by focusing on debt relief for local governments rather than boosting domestic demand.
Iron ore prices have dropped significantly, with futures in Singapore sliding 1.8% to US$100.75 per tonne on Monday, following a 3% decline last Friday. This pressure has compounded as the property sector continues to drag on China’s economy. The Australian mining sector responded, with the S&P/ASX 200 Resources Index falling 2.8% on Monday. Key players have also fallen. Champion Iron (ASX:CIA) has dropped 10.08% to $5.62, Fortescue (ASX:FMG) has fallen 6.85% to $18.21, BHP Group has shed 3.99% to $41.67, and Rio Tinto has declined 3.46% to $119.04.
Commonwealth Bank’s lead strategist Vivek Dhar noted that while markets had hoped for more impactful stimulus, further infrastructure investments would be necessary for China to meet its 5% growth target. ANZ analysts suggested that Beijing’s strategy leaves room to assess the impact of incoming US policies. Trump’s threat to impose a 60% tariff on Chinese goods adds uncertainty, with ANZ projecting the average tariff to rise to 22% by 2025 from 13% currently.
The iron ore market has already faced significant pressure, down by more than 25% this year due to weak demand and rising steel exports. Inventories have expanded to record seasonal highs, and consumer inflation in China remains subdued, raising doubts about current stimulus efficacy. “Ongoing stimulus is essential to lift China out of deflation,” said Citi analyst Xinyu Ji.
The market’s attention now turns to China’s Politburo meeting and Central Economic Work Conference in December, where more pro-consumption measures may be unveiled.