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Dalian and Singapore iron ore futures slumped to their lowest in more than a week on Tuesday, extending a retreat after last week’s rally, as pessimism grew over demand prospects in top steel producer China.
Benchmark prices of the steelmaking ingredient have fallen more than 20% from this year’s peak at just above $130 a tonne around mid-March, when sentiment was positive as China entered its peak spring construction season and following its exit from strict COVID-19 restrictions.
With the construction season coming to an end and steel demand not meeting expectations, while the domestic economy performs unevenly amid a sluggish property sector, analysts said China’s iron ore consumption may remain muted.
Iron ore’s benchmark June contract on the Singapore Exchange SZZFM3 was down 2.5% at $99.55 a tonne, as of 0710 GMT, hitting an intraday low of $99.30, its weakest since May 12.
The most-traded September iron ore on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trading 3% lower at 707 yuan ($102.28) a tonne, after touching 704 yuan, its lowest since May 15.
Iron ore has pulled back after last week’s rally, spurred by hopes that China will roll out additional policy support for its economy.
“However, considering the lack of significant changes in monetary and fiscal policies, it is anticipated that China’s economic cycle will reach its trough in Q3,” industry consultancy and data provider Mysteel said in its weekly outlook.
“The bearish expectation stems from the residential sector and private corporate sector, which are less optimistic about future prospects.”
Mysteel said the decline in real estate investment and new construction activity in China in the January-April period signalled continued weakness in steel demand.
Rebar on the Shanghai Futures Exchange SRBcv1 dipped 0.6%, hot-rolled coil SHHCcv1 shed 0.9%, wire rod SWRcv1 lost 0.5%, while stainless steel SHSScv1 dropped 1.4%.
On the Dalian exchange, coking coal DJMcv1 added 0.1%, but coke DCJcv1 fell 0.7%.