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Dalian iron ore futures tumbled on Wednesday to their lowest in 16 weeks, while a sell-off resumed in Singapore, as worries grew about an oversupply of steel in China, the world’s biggest producer of the manufacturing and construction material.
Benchmark September iron ore on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trade 6% lower at 709.50 yuan ($105.57) a tonne, extending losses to a ninth straight session. It plunged to 698.50 yuan earlier in the day, the lowest since March 1.
The steelmaking ingredient’s front-month July contract on the Singapore Exchange SZZFN2 was down 5.6% at $108.45 a tonne, as of 0706 GMT, after a one-day rebound from an eight-session sell-off.
Iron ore has wiped out its 2022 gains in Singapore.
In the spot market, the benchmark 62%-grade material bound for China traded at $117.50 a tonne on Tuesday, based on SteelHome consultancy data SH-CCN-IRNOR62, rebounding from a six-month low of $115.50 a tonne hit the day before.
“Markets are particularly worried that demand growth expectations linked to China’s pledge to boost infrastructure investment may not materialise, especially with China’s zero-COVID policy still in play,” said Commonwealth Bank of Australia analyst Vivek Dhar.
Worries remain about renewed restrictions dampening overall domestic demand, as China continues to detect new coronavirus cases day after day.
Disruptions to construction activity caused by heavy rains in some parts of China have also led to the piling up of steel inventory, prompting steel mills to idle blast furnaces to cut losses.
“Doubts over China’s future steel demand growth has meant that markets could no longer ignore current market conditions of oversupply in China’s steel sector,” Dhar said.
Construction steel rebar on the Shanghai Futures Exchange SRBcv1 fell 1.4%, while hot-rolled coil SHHCcv1 dipped 1.5%. Stainless steel SHSScv1 shed 0.6%.
Other steel inputs also remained under pressure, with Dalian coking coal DJMcv1 and coke DCJcv1 both slipping 0.5%.