What’s going on?

• Iron ore price dropped to a 4-month low, as China decided to go green.

What does this mean?

• Iron ore is a major component of steel, which is a major component of cars, buildings, and things that helps the world stay still.
• The recent price drop of iron ore might be largely due to:
  • As steel production is a major pollutant, a newly eco-conscious China started cutting down on its steel production. And as the world’s biggest user of iron ore, that could leave a serious fall in demand for iron ore.
  • China has also been restraining the property market, causing house prices to grow at their slowest pace in 6 months. That means less incentive to build houses, which eventually sends demand for iron ore down.

Why should I care?

The bigger picture: Metals and the global economy

• Metals like copper, iron, and steel are seen as economic bellwethers that give an idea of the global economy health, since they’re so closely tied to how busy countries are keeping.
• So if they’re on the decline, it’s not a great sign for things as a whole.
  • Copper – which is used in everything from electronics to construction – has also fallen nearly 20% in price from its May peak.

Zooming out: It’s not the only one

• That might be one reason why investors sold off stocks after the price fall, but it’s not the only one.
  • The vaccine-dodging delta variant is putting economic recoveries at risk across the globe
  • US and Chinese economic growth is shown to be slowing down.
  • It’s likely that the US Federal Reserve would pull some of its economic support before too long, which put investors on edge.

Content source: Finimize (2021) Woke-Up Call. Available at: https://www.finimize.com/wp/news/woke-up-call/ [Accessed on Aug 21, 2021]