After climbing to a six-month high two weeks ago, the Australian dollar has since tumbled, as fears mount about the economic health of our largest trading partner, China.

After trading well above $US200 ($305) per tonne during the pandemic, the price of Australia’s most lucrative export, iron ore, has fallen to under $US110 per tonne.

Key to the weakness in the iron ore price is the lack of steel being produced in China for housing construction.

“Until the Chinese government makes a material stimulus, and puts some actual money behind this idea of recovery in the property market, the iron ore price is going to remain subdued,” Bell Direct market analyst Grady Wulff said.

Burst bubble

China’s economic problems began escalating last year when its property market collapsed.

In the years leading up to that, China couldn’t buy enough Australian iron ore, which is used to make steel for property construction.

Mr Wulff said the Chinese government’s efforts to ring-fence the economic fall-out of the property rout do not appear to be working.

“But it just hasn’t come to fruition.

“Until we do see that, and until we see the data show the economy is showing signs of material growth post the pandemic, we’re not going to see a recovery in the iron ore price.

“For example last week China’s economy grew 4.7 per cent from April to June, and that missed analysts’ expectations of growth of 5.1 per cent.”