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What's going on?
The price of iron ore dropped to a four-month low on Thursday, as China decided that, hey, it is pretty easy being green.
What does this mean?
Iron ore is a major component of steel, which is itself a major component of cars, buildings, and all the other stuff that helps the world keep ticking over. But steel production is also a major pollutant, which might be why a newly eco-conscious China reportedly started cutting back on its steel production last month. And as the world’s biggest user of iron ore, that could leave a serious dent in demand for the metal.
It’s not China’s only cutback lately: the People’s Republic has also been reining in the property market, causing house prices to grow at their slowest pace in six months. That means less incentive to build steel-dependent houses, sending demand for – and the price of – the metal down.
Why should I care?
The bigger picture: Bellwethers speak, investors listen.
Copper – which is used in everything from electronics to construction – has fallen nearly 20% from its May peak too. That’s not a great sign: metals like copper, iron, and steel are seen as economic bellwethers that give an idea of the health of the global economy, 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…
For markets: When it rains, it pours.
That warning sign might be one reason why investors sold off stocks on Thursday morning, but it’s not the only one. The vaccine-dodging delta variant is putting prized economic recoveries at risk across the globe, while data this week showed US and Chinese economic growth is slowing down. Add to that the possibility the US Federal Reserve will pull some of its economic support before too long, and it’s no surprise investors are on edge.
Originally posted as part of the Finimize daily email.
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