Iron ore prices experienced a decline on Thursday, influenced by expectations of reduced demand due to potential cuts in crude steel output from China, the largest consumer of iron ore. The September iron ore contract on China’s Dalian Commodity Exchange fell by 2.73% to close at 693.5 yuan ($95.82) per metric ton, marking its lowest level since April 11. Similarly, the benchmark June iron ore on the Singapore Exchange dropped by 1.95% to $96.4 per ton. Analyst Zhuo Guiqiu of broker Jinrui Futures indicated that the market’s price movement is primarily driven by the renewed expectations regarding steel output cuts.
He noted that the price drop for steelmaking ingredients is occurring at a faster rate compared to steel prices themselves. The China Iron and Steel Association suggested that relevant authorities are actively working on controlling the nation’s crude steel output, further solidifying market concerns. In March, China announced plans to restructure its extensive steel industry through production cuts, although details about the timing and scale were not disclosed. Zhuo emphasized that the statements from the steel association have reinforced market anxieties regarding output cuts.
Additionally, hot metal output, a crucial benchmark for gauging iron ore demand, is expected to peak soon. Other steelmaking ingredients also saw price declines, with coking coal and coke falling by 2.13% and 2.25% respectively. The Shanghai Futures Exchange also reported a downturn in steel benchmarks, with rebar down 1.74%, hot-rolled coil by 1.18%, wire rod by 0.43%, and stainless steel by 0.31%. This bearish trend in the ferrous market persisted despite recent monetary stimulus measures introduced by Beijing to mitigate the economic fallout from the trade tensions with the United States.
An unidentified analyst remarked that the stimulus package signals a troubling preparedness for a worst-case scenario in Sino-U.S. trade relations.