Iron ore futures experienced a slight decline on Monday, primarily driven by the prospect of cutbacks in crude steel production in China. However, these losses were somewhat mitigated by a sustained increase in demand for this crucial steelmaking component. The September iron ore contract on China’s Dalian Commodity Exchange (DCE) concluded the daytime session down by 0.49%, settling at 710.5 yuan ($97.32) per metric ton. Conversely, the May benchmark on the Singapore Exchange showed a slight increase of 0.18%, trading at $98.6 a ton as of 0705 GMT.
The largest steel producer in China, Baoshan Iron & Steel, indicated that a nationwide reduction in steel output is likely this year. While the state planner and the China Iron and Steel Association have yet to respond to queries from Reuters, expectations for steel supply and demand in China are shifting. According to Wu Wenzhang, chairman of consultancy Steelhome, balance may be reached if crude steel production falls by 50 million tons compared to last year. He also forecasts a decrease in steel consumption by approximately 30 million tons this year and a drop in steel exports of between 15 million and 25 million tons.
Despite these concerns, the market saw partial support from strong short-term demand as steelmakers increased their production rates. Hot metal output surged last week to its highest level since October 2023, totaling 2.4435 million tons, according to broker Everbright Futures. This figure is often indicative of iron ore demand. Elsewhere on the DCE, other steel ingredients showed declines, with coking coal and coke falling by 1.66% and 1.2%, respectively.
However, many steel benchmarks on the Shanghai Futures Exchange recorded gains, with notable increases in rebar, hot-rolled coil, and stainless steel prices, while wire rod prices saw a small decrease.