Dalian and Singapore iron ore futures were subdued on Thursday amid worries that Chinese demand for the steelmaking ingredient will remain weak in the near term, overshadowing China’s stepped-up fiscal support for its flagging economy.
The most-traded January iron ore on China’s Dalian Commodity Exchange ended daytime trade 0.7% higher at 876.50 yuan ($119.76) per metric ton, after swinging between losses and gains within a tight range.
On the Singapore Exchange, the benchmark November iron ore contract was down 0.1% at $117.15 per ton, as of 0715 GMT, after a three-day advance.
The urgent concern is that Chinese steel mills might be prompted to curb production to comply with emission control protocols, particularly during winter months, and to minimise losses amid weak sales, analysts said.
That, along with prevailing concerns about China’s property sector crisis, has kept iron ore’s gains muted in recent days, which were spurred by the topiron ore consumer’s additional fiscal measures to bolster economic growth.
“Questions remain over how quickly real demand will materialize as construction activity tends to decline over winter months,” Al Munro at broker Marex said in a note.
The China Iron and Steel Association has said domestic crude steel production could drop in the last quarter of 2023 due to mandatory production cuts to control emissions and the regular pollution constraints during winter months, according to ING analysts.
There could be some support from the supply side, however, with Australian miner Fortescue reporting a 3% drop in its quarterly iron ore shipments because of increased maintenance and lower port stockpiles, while operational problems at its Iron Bridge project limited processing.
Other steelmaking ingredients on the Dalian exchange were slightly firmer in volatile trade, with coking coal and coke up 1.1% and 0.6%, respectively.
Chinese steel benchmarks were mixed. Rebar SRBcv1 gained 0.6%, while hot-rolled coil added 0.1%. Wire rod and stainless steel both lost 0.6%.