Iron ore futures experienced a range-bound trading session on Tuesday, as market participants weighed the ongoing challenges in China’s property sector against the steady demand for this essential steelmaking material. Despite the backdrop of a struggling real estate market, the demand for iron ore remains robust, largely supported by stronger steel profit margins. On the Dalian Commodity Exchange, the most actively traded May iron ore contract concluded the day down 0.58%, closing at 777 yuan ($107.45) per metric ton. Similarly, the benchmark April iron ore on the Singapore Exchange showed minimal changes, standing at $102.10 per ton as of 0700 GMT.
Analyst Pei Hao from Freight Investor Services noted that the recent construction data revealed a significant decline, suggesting that a rebound in steel demand from the property sector is unlikely in the near term. This trend is likely to put pressure on the prices of steel and its raw materials. Sunac China, previously one of the largest real estate developers in the country, announced on Monday that it anticipates a larger loss for the year ending in December 2024. However, Pei expressed that drastic price declines in iron ore are not expected shortly, as consumption is expected to be supported by improved steel margins.
Analysts from Maike Futures indicated that lower raw material prices have led to an increase in steel margins, with 53.25% of steelmakers reporting profits by mid-March, up from 50.22% in late February. Looking ahead, there are expectations for an increase in crude steel production in March, driven by improving profit margins and escalating downstream demand. Surveys show that about 28% of steel mills plan to boost production next month, a slight increase from the previous month’s 25%. Meanwhile, other steelmaking inputs such as coking coal and coke saw declines, and steel benchmarks on the Shanghai Futures Exchange also experienced dips, indicating a broader trend of adjustment amid mixed market signals.