South Africa’s Kumba Hopes China Infrastructure Stimulus Will Revive Iron Demand

South Africa’s Kumba Iron Ore hopes China’s stimulus package on infrastructure will drive demand for iron ore up after Beijing’s Covid-19 lockdowns and China’s property crisis caused demand to shrink and hit prices in the first half of the year. Company shares have fallen on Tuesday since it reported a 50% decline in profit in the first half of 2022 primarily because of lower iron prices and soaring fuel and freight costs.

Its headline earnings per share stood at 36.13 rand ($2.16) for the six months to June 30, compared with 72.82 rand last year.

China imports iron ore to feed its steel industry, which the world’s largest. The biggest customers of China’s steel are real estate and infrastructure sectors. Beijing has pledged to boost infrastructure spending to revive the world’s second-biggest economy after it slowed sharply in the second quarter, hit by strict COVID-19 containment measures and a distressed property market.

Kumba said it expects demand for iron ore to grow following the significant stimulus that’s being provided by the Chinese authorities.

Iron ore prices touched two-week highs on Tuesday, extending a rally driven by hopes that Beijing’s support for the real estate industry would also lift demand.

First-half production at Kumba’s two mines declined 13% to 17.8 million tonnes, mainly because of heavy rains that impacted operations in the first quarter.

These operating challenges were worsened by supply chain disruptions and rising costs, partly due to the conflict in Ukraine, weaker steel demand after COVID-19 lockdowns in China and a softer global economic outlook.

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