Iron ore prices dropped on Thursday, as traders weighed prospects of weakening demand amid fresh expectations of crude steel output cuts in top consumer China.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange (DCE) closed daytime trade down 2.73% at 693.5 yuan ($95.82) a metric ton, its lowest since April 11.
The benchmark June iron ore (SZZFM5) on the Singapore Exchange lost 1.95% to $96.4 a ton, as of 0716 GMT.
“It’s mainly resumed expectations of steel output cuts that are driving the market movement with price fall of steelmaking ingredients more dramatic than that of steel,” said Zhuo Guiqiu, an analyst at broker Jinrui Futures.
Relevant authorities are actively advancing the national crude steel output control, the state-backed China Iron and Steel Association said in a note this week.
In March, China unveiled a plan to restructure its giant steel industry through production cuts, without elaborating on the timing and scale.
“This saying from the steel association has reinforced such expectations (of steel output cut). Moreover, hot metal output is set to brace a peak soon,” Jinrui’s Zhuo said.
Hot metal output, a blast furnace product, is typically used to gauge iron ore demand.
Other steelmaking ingredients on the DCE slumped, with coking coal and coke (DCJcv1) down 2.13% and 2.25%, respectively.
Steel benchmarks on the Shanghai Futures Exchange retreated. Rebar lost 1.74%, hot-rolled coil shed 1.18%, wire rod (SWRcv1) dipped 0.43% and stainless steel edged down 0.31%.
The weakness in the ferrous market came despite Beijing injecting a raft of monetary stimulus on Wednesday as part of efforts to soften the economic damage caused by the trade war with the United States.
“It’s not a very good signal for the Sino-U.S. trade talks if looking at the stimulus package, which hints a preparation for the worst-case scenario,” said an analyst on condition of anonymity because of the sensitivity of the matter.
Source: Reuters