Iron ore futures experienced a decline on Wednesday, marking a third consecutive monthly decrease as concerns over potential steel production cuts in China loom. The slowdown in demand anticipates the upcoming Labour Day holiday, further influencing market dynamics.
The most actively traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) closed 0.78% lower at 703.5 yuan ($96.81) per metric ton, resulting in a total monthly loss of 3.96%. Meanwhile, the benchmark May iron ore on the Singapore Exchange was also down, trading at $97.8 a ton, reflecting a monthly decrease of 3.16%.
Senior figures from the Chinese steel industry have pointed to the likelihood of cuts in steel production, despite the absence of an official government directive. Luo Tiejun, vice-chairman of the China Iron and Steel Association (CISA), highlighted the urgent need for coordinated action on this matter, citing significant pressures from both domestic market declines and international trade tensions.
Furthermore, Baoshan Iron & Steel, China’s largest listed steelmaker, mentioned the likelihood of nationwide output reductions within the year. Commenting on the situation, ANZ noted that market sentiment weakens ahead of the Labour Day holiday, coupled with reduced restocking activities among Chinese steel mills.
This holiday will see China’s financial markets closed from May 1 to May 5, with trading set to resume on May 6. Additionally, a recent factory survey indicated that China’s factory activity contracted at the fastest rate in 16 months during April, driven by tariff impacts on economic recovery.
Other steelmaking inputs also fell in value, with coking coal and coke declining by 0.59% and 0.97%, respectively, while steel benchmarks on the Shanghai Futures Exchange showed similar downtrends.