Sluggish China steel demand drags iron ore lower

DALIAN and Singapore iron ore futures fell to a more-than-four-month low on Tuesday (Apr 25) as sluggish steel demand in China prompted mills to curb output, raising the possibility of an oversupply of the steel-making raw material.

The most-traded September iron ore on China’s Dalian Commodity Exchange ended daytime trade 1.9 per cent lower at 711 yuan (S$137.32) a tonne, having earlier hit 710.50 yuan, its weakest since Dec 20.

Iron ore’s benchmark May contract on the Singapore Exchange, dropped 0.8 per cent to US$103.05 a tonne. It earlier hit US$102.35, its lowest since early December.

Some mills in top steel producer China now hurting from lacklustre steel demand and a slump in prices “have started to actively limit production”, Sinosteel Futures analysts said in a note.

According to industry consultancy and data provider Mysteel, some 52 of 126 blast furnaces in Tangshan, China’s top steelmaking city, have gone into maintenance.

Spot 62 per cent-grade iron ore for delivery to China dropped to US$110 a tonne on Monday, the lowest since early December, and down nearly 9 per cent this week, according to SteelHome consultancy.

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While China’s infrastructure investment rose 8.8 per cent year-on-year in the first quarter, property investment fell 5.8 per cent.

China’s infrastructure sector may continue to benefit this year from the projects initiated at the end of 2022, although growth may weaken in 2024 if no large-scale projects begin this year, the World Steel Association said in a quarterly report last week.

The country’s manufacturing sector is expected to show only a moderate recovery in 2023-2024, with slowing exports, the Brussels-based group said.

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Rebar on the Shanghai Futures Exchange fell 1.6 per cent, hot-rolled coil also shed 1.6 per cent, while wire rod climbed 2.5 per cent and stainless steel gained 0.4 per cent.

Coking coal and coke on the Dalian exchange declined 1 per cent and 2.3 per cent, respectively. REUTERS