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Iron ore futures slumped to fresh four-month lows on Monday as weak steel demand in China prompted a production slowdown, while major miners’ latest reports signalled ample supply of the steelmaking ingredient.
The most-traded September iron ore on China’s Dalian Commodity Exchange fell as much as 3.7% to 717 yuan ($103.90) a tonne, its weakest since Dec. 21.
On the Singapore Exchange, benchmark May iron ore dropped as much as 3.5% to $104.35 a tonne, the lowest since Dec. 19.
Steel benchmarks on the Shanghai Futures Exchange also dipped, with rebar SRBcv1 shedding 3.6% to its weakest since Nov. 28, while hot-rolled coil lost as much as 3.5% to its lowest since Dec. 2.
“Despite the construction season underway (in China), steel prices have continued to fall amid weak demand and rising inventories,” ANZ commodity strategists said in a note.
More than 40% of steel furnaces in Tangshan, China’s largest steel-producing city in Hebei province, have gone into maintenance, reducing iron ore demand, they said.
“There were promising signs of better production discipline among Chinese rebar producers over the past week, as mills began reacting to highly negative margins,” Navigate Commodities managing director Atilla Widnell said.
Iron ore has also lost support from the supply side.
Fortescue Metals Group FMG.AX retained its full-year shipment guidance despite a cyclone this month that disrupted exports from Australia’s iron ore hub.
Rio TintoRIO.AX, RIO.L has reaffirmed its annual iron ore shipments forecast after reporting a better-than-expected 15.4% jump in first-quarter shipments from Western Australia.
Brazilian miner Vale SA VALE3.SA, meanwhile, reported a 5.8% year-on-year increase in first-quarter iron ore production, while BHP reiterated its annual forecast for Western Australian iron ore output.
Wire rod SWRcv1 on the Shanghai exchange fell as much as 3%, while stainless steel SHSScv1 dropped by up to 3.2%
Coking coal DJMcv1 and coke DCJcv1 on the Dalian exchange dipped 1.6% and 2.4%, respectively.