Iron ore sinks below US$100 on grim China demand outlook
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DALIAN and Singapore iron ore futures tumbled below US$100 on Friday (Jul 15) on heightened fears over waning demand for steel, as China’s economy faltered in the second quarter and a crisis in its property sector appeared to be worsening.
Top steel producer and iron ore consumer China’s economy contracted by a worse-than-expected 2.6 per cent in the second quarter from the previous quarter due to Covid lockdowns.
The most-traded September iron ore on China’s Dalian Commodity Exchange was down 10 per cent at 645 yuan (S$133.89) a tonne at the end of daytime trade, after earlier hitting 641.50 yuan, its lowest since Dec 15.
It has fallen 13.3 per cent this week, the steepest drop since mid-Feb.
On the Singapore Exchange, the front-month August contract for the steelmaking ingredient dropped 4 per cent to a session-low US$96.25 a tonne, its weakest since November, putting it on track for a weekly loss of more than 11 per cent.
Mirroring weakness in iron ore demand, China’s crude steel output fell 3.3 per cent in June compared with a year earlier, and was down 6 per cent from May.
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Chinese steel producers are cutting back on output to help curb emissions and with margins squeezed by weak demand, clouding prospects for an immediate rebound in consumption of steelmaking ingredients.
They are also facing more headwinds with bad weather, Covid curbs, and an ongoing crisis in the property sector.
Chinese banks are set to take a hit to asset quality from mortgage business as growing numbers of home buyers threaten to stop loan repayments to protest against unfinished apartments, adding to woes for the property sector.
“We believe government needs to intervene decisively and swiftly in order to stabilise property and capital market sentiment,” JP Morgan analysts said in a note.
Rebar on the Shanghai Futures Exchange slumped 7.2 per cent, while hot-rolled coil tumbled 7.3 per cent. Stainless steel shed 4.2 per cent.
Dalian coking coal dropped 7.3 per cent and coke lost 2.9%. REUTERS
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