Dalian iron ore futures slid to the lowest in nearly six months on Thursday on expectations that China’s demand for the steelmaking ingredient will remain sluggish during the typical summer lull in domestic construction activity.
Iron ore’s benchmark price in Singapore, however, somewhat stabilized after a five-session selloff, suggesting near-term prices may have bottomed out.
The most-traded September iron ore on China’s Dalian Commodity Exchange ended daytime trading 2.2% lower at 681 yuan ($98.52) a tonne, after earlier hitting 674 yuan, its weakest since Dec. 2.
On the Singapore Exchange, the most-active June iron ore was down 0.2% at $95.25 a tonne, as of 0735 GMT, after hitting a three-week low of $94.70 earlier in the session.
SGX iron ore has now fallen more than 15% this year, surrendering earlier gains as the initial optimism around top steel producer China’s demand prospects for 2023 had faded away.
Worries about China’s sputtering post-COVID economic recovery now dominate the market. China’s steel production control is also expected to dampen iron ore demand.
The yuan’s weakness and selloff in China’s equities market spurred by a widening U.S.-China trade and technology dispute added to the gloomy mood.
Coking coal and coke on the Dalian exchange slumped 3.4% and 4.7%, respectively.
Rebar on the Shanghai Futures Exchange shed 2.5%, hot-rolled coil dropped 1.8%, wire rod lost 3%, while stainless steel climbed 1.6%.
Chinese steel demand during the peak spring construction season was below expectations, and it is not expected to improve with the summer lull around the corner.
“The rainy season in the south is coming, the downstream demand for finished products continues to weaken, while the supply side is generally stable,” Huatai Futures analysts said in a note.
Hot weather and rain in China during summer from June to August typically slow construction activity, curbing demand for steel.