Iron ore tumbles on persistently weak fundamentals in China

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Iron ore futures prices extended their decline into a second straight session on Monday, to the lowest in more than four months, dragged down by the persistently weak fundamentals of the key steelmaking ingredient in top consumer China.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) DCIOcv1 ended daytime trade 5.41% lower at 831 yuan ($115.68)a metric ton, the lowest since Oct. 23, 2023.

The benchmark April iron ore SZZFJ4 on the Singapore Exchange slid 6.71% to $107.45 aton, as of 0808GMT, the lowest since Aug. 22.

A temporary supply glut as a result of better-than-expected shipments so far in the first quarter of the year and weaker-than-expected demand recovery has put intense downward pressure on prices, analysts said.

“The global ore shipments have climbed to a relatively high level. The recent ore price fall has not triggered a production reduction among non-mainstream suppliers,” analysts at Citic Futures said in a note.

“Some mills postponed again the timing of production resumption, curbing ore demand rise and destocking at ports,” they added.

Poor profitability among steelmakers dented their interest in ramping up output, and the weakness in the steel market permeated into the upstream raw materials market, weighing on ore prices, analysts at Everbright Futures said in a note.

Other steelmaking ingredients on the DCE lost ground, with coking coal DJMcv1 and coke DCJcv1 down 2.65%and 2.04%, respectively.

Steel benchmarks on the Shanghai Futures Exchange were similarly weaker. Rebar SRBcv1 slipped 2.41%, hot-rolled coil SHHCcv1 shed 1.95%, wire rod SWRcv1 fell 1.62% and stainless steel SHSScv1 surrendered 1.34%.

The weakness in the ferrous market came despite Chinese regulators asking large banks to step up support for Vanke, a state-backed property developer.

Property market in China, the largest steel consumer, has been hit hard by a debt crisis and not yet shown obvious signs of improvement despite various measures introduced by Beijing to revive the sector.

Source: Reuters