China Shakes Iron Ore Price with Pollution Crack Down

If you have ever been to China, you know pollution is a problem, mainly due to the widespread use of coal. In fact, our publisher Kris Sayce was just there and got the following picture:

china pollution

Source: Port Phillip Insider

Lovely views, right?

According to the ABC, over a million people die prematurely in Northern China because of the air’s toxicity.

China is now embarking on an unprecedented battle to tackle pollution just before winter and the National Congress of the Communist Party of China, which takes place in October. Winter is when the worst pollution of the year happens, as use of coal for heating increases.

The city of Tangshan has already taken action. In a measure to stop pollution from reaching dangerous levels, the city, which is China’s largest steel producing city, closed half of its iron processing plants yesterday.

Iron ore rallied in July and August. Yet it has plummeted in the last few weeks after fears that the crack-down on pollution could affect both supply and demand of the iron ore market.

Still, the price today was up 3%, driving mining stocks up with it. Mineral Resources Ltd [ASX:MIN] is up 2.84%, Fortescue Metals Group Ltd [ASX:FMG] added 2.68%, South 32 Ltd [ASX:S32] increased 1.25% and Rio Tinto Ltd [ASX:RIO] is up 1%.

What Now for Iron Ore Price?

Goldman Sachs expects further falls to iron ore prices as China enforces environmental restrictions. The extent of how the pollution crack down affects iron ore prices will depend on how strict China gets on its ‘War against Pollution’.

PS. If you want to know our top 10 Aussie mining stocks for this year, go here.

Selva Freigedo,

For Money Morning

Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Fat Tail Investment Research readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid.

Every week, she goes through each article, research note and recommendation produced by our experts around the world to give you information on how to build and protect your wealth. Selva packages the week’s best ideas into one easy to read report: Port Phillip Insider Extra.

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