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Iron ore futures slumped on Thursday as pessimism over steel demand in China prevailed, even as traders monitored a strong cyclone that could disrupt shipments of the steelmaking ingredient from top supplier Australia.
Weakening steel prices in China indicated lacklustre demand at a time when construction activity in the top iron ore consumer is picking up. Rising recession risks have also clouded prospects for Chinese steel exports, analysts said.
China’s unconfirmed plan to limit annual crude steel output, as it seeks to curb iron ore price speculation, has also been a drag on the market.
China is set to release a plan capping domestic steelmakers’ output at 2022 levels, Bloomberg reported on Thursday.
The most-traded September iron ore on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trade 3.1% lower at 769 yuan ($111.89) a tonne.
On the Singapore Exchange, iron ore’s benchmark May contract was down 2.3% at $115.55 a tonne, as of 0702 GMT.
“Iron ore is facing price control pressure, and policy risks continue to increase,” Sinosteel Futures analysts said in a note.
Meanwhile, Port Hedland in Australia’s northwest region, braced on Thursday for Cyclone Ilsa, the area’s most powerful tropical cyclone in a decade, potentially disrupting supply and providing support to iron ore prices.
Expectations of stronger domestic steel demand this year had prompted China to ramp up iron ore imports in January to March, which surged nearly 10% from a year earlier to a record first-quarter volume.
On the Shanghai Futures Exchange, rebar SRBcv1 fell as much as 1.5% to its lowest since Dec. 20, while hot-rolled coil SHHCcv1 dipped 1.9% to its weakest since Feb. 3. Wire rod dropped 1.7% and stainless steel shed 0.6%.