Dalian iron ore futures fell on Monday, dragged by persistent concerns about China’s property sector crisis, and signs of weakening demand from Chinese steel mills.
The most-traded January iron ore on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trade 2.5% lower at 835 yuan ($114.13) per metric ton and was on track for its third straight session of decline.
On the Singapore Exchange, the steelmaking ingredient’s benchmark November contract SZZFX3 rose 0.3% to $112.85 by 0822 GMT, after falling as much as 1.7% to its lowest levels since Oct. 11.
More debt defaults are likely to emerge in China’s property sector, which accounts for a substantial portion of domestic steel demand, as developers struggle with a weak sales outlook while fundraising remains challenging, credit analysts said.
Country Garden 2007.HK bondholders are seeking urgent talks with the troubled property developer after it missed a $15 million coupon repayment, putting it at risk of default, according to three sources.
“The likely default raises concern that weak demand in China’s home market remains a headwind for steel and iron ore,” ANZ Research analysts said in a note.
Weak market fundamentals also weighed on iron ore prices, analysts said.
The blast furnace capacity utilization rate among the 247 Chinese steelmakers surveyed by industry data and consultancy provider Mysteel dropped for a third consecutive week to 90.62% over Oct. 13-19.
Many steel mills in China, the world’s biggest steel producer, have halted furnaces for maintenance in recent weeks, seeking some respite from the expanding losses amid weak sales, Mysteel reported.
Other steelmaking ingredients on the Dalian exchange also fell, with coking coal DJMcv1 and coke DCJcv1 down 2.6%and 1.7%, respectively.
Steel benchmarks on the Shanghai Futures Exchange also dipped. Rebar SRBcv1 shed 1.6%, hot-rolled coil SHHCcv1 dropped 1.1%, and stainless steel SHSScv1 lost 1%.