Mining stocks have taken a hammering on world markets after the price of iron ore – Australia’s biggest export – posted the biggest one-day fall in over four years.



Figures showing an 18% fall in Chinese exports in February amplified fears of a slowdown in the world’s No. 2 economy, sending raw material prices plunging.

Iron ore for immediate delivery to China fell 8.3% to $104.70 a tonne, its largest one-day percentage fall in four and a half years, data compiled by The Steel Index shows.

Iron ore is a key ingredient in steelmaking and is the top revenue earner for Australia’s large mining concerns, BHP Billiton and Rio Tinto.

The spot price has fallen 22% this year and the companies took a battering during Monday’s trading sessions in Sydney and London as investors weighed the impact on their profitability.

The Australian listings fared a bit better on Tuesday. After a sharp fall in the morning, Rio was up 1.16% at $61.91 and BHP was down fractionally at $36.14.

The disappointing China trade data weighed on other commodities, including copper and oil, although China’s imports of most were up on the year. The weak exports suggested China’s commodity import demand could shrivel in coming months as end-users draw down swollen inventories.

“Any poor news from China is always going to hit short-term market sentiment, especially in the mining sector, and fears of slower growth will hit base metals,” said IPR Capital director Steven Mayne in New York.

China’s exports fell 18.1 per cent in February from a year ago, when the market had been expecting an increase. The dismal numbers followed a series of factory surveys since the start of 2014 that have pointed to weakness in economic activity as demand has faltered at home and abroad.



Steel demand in China, the world’s biggest consumer and producer, has been weak since the start of the year as a slowing economy curbs demand for the building material.

Construction activity, which typically picks up from March, is unlikely to spur a strong recovery in demand for steel as Beijing pursues economic expansion that is driven less by investment and more by domestic consumption.

The sustained slide in steel prices suggests more downside risk for iron ore, traders said.

“Mills are more reluctant to buy iron ore in this situation, and we will see iron ore continue to drop in the next few days. We may break $100 in a very short time,” another trader in Shanghai said.

A slump in iron ore to a three-year low of $86.70 in September 2012 shut many high-cost mines in China and forced global miners to rethink expansion and focus on cost cuts.

The price slide comes after stockpiles of imported iron ore at Chinese ports rose to a fresh record of 105 million tonnes on Friday, data from industry consultancy Steelhome shows.

In February China’s iron ore imports rose 11.9 per cent from a year earlier to 63.2 million tonnes, but were still down from a record high of 86.8 million tonnes in January.

The sustained increase in stockpiles reflected arrivals of iron ore contracted by Chinese mills under long-term deals, traders said, as well as its growing use as a loan collateral in tight credit conditions.