Dalian iron ore futures hit a one-year low on Wednesday as demand worries intensified due to China’s curbs on its steel output and a worsening liquidity crisis in the country’s property sector.
The most-traded January iron ore contract on the Dalian Commodity Exchange ended daytime trading 4.6% lower at 536.50 yuan ($83.85) a tonne, after touching 518.50 yuan earlier in the session, its weakest since Nov. 9, 2020.
On the Singapore Exchange, the most-traded December contract was down 4% at $87.20 a tonne, as of 0721 GMT, after initially falling as much as 6.9%.
“(China’s steel) production restrictions have suppressed expectations for winter (iron ore) storage and replenishment,” analysts at Zhongzhou Futures Co Ltd wrote in a note. “The scope of limited production during the heating season has expanded, (while) blast furnace maintenance has increased.”
Loose supply and weak demand suggest portside iron ore inventory in China, which swelled to a 31-month high of 145.10 million tonnes last week according to SteelHome consultancy data, will continue to accumulate, they said.
A deepening liquidity crisis in the Chinese property sector, which accounts for about a quarter of domestic steel demand, added to the bearish mood ahead of a deadline for cash-strapped China Evergrande Group to make an offshore bond coupon payment on Wednesday.
“Increasing risks of weaker demand from the Chinese property sector saw iron ore futures push lower,” said Daniel Hynes, senior commodity strategist at ANZ.
The spot price of benchmark 62%-grade Australian iron ore for delivery to top steel producer China hit an 18-month low of $93 a tonne on Tuesday, SteelHome data showed.
Construction steel rebar on the Shanghai Futures Exchange fell 1.2%, while hot-rolled coil SHHCcv1 shed 1.7%, both trimming the day’s losses.
Stainless steel reversed early losses and ended 0.6% higher.
Dalian coking coal slid 3.2% and coke DCJcv1 slumped 3.3%.