Iron ore sank closer to its lowest since 2022, as the steelmaking material extended a sell-off on fears for China’s crisis-wracked steel industry.
Futures in Singapore fell 1.7% to US$92 a tonne at 4.30pm local time, heading for a fourth daily decline. There’s been little sign yet that tough conditions for Chinese steel mills - weak demand, soft prices, and falling profits - are improving, as the world’s biggest steel industry faces up to long-term challenges.
“Iron ore supply will most likely continue to rise, no matter what,” said Chen Guanyin, an analyst at Mysteel Global. “So, whether iron ore drops further, will largely depend on whether demand for steel products sees a substantial rebound from the seasonal lull.”
Spot steel prices have dropped again this week, piling even more pressure on steelmakers that posted heavy losses in the year’s first half. A majority of global banks expect China’s economy to miss the government’s 5% growth target this year, with Beijing avoiding any large-scale stimulus.
This summer’s steel crisis has prompted China’s biggest mills to warn that the industry must adjust to a new era in which demand is expected to decline. That puts iron ore at risk after a long and lucrative era for top global miners, including BHP Group Ltd and Rio Tinto Group.
“Demand for steel in China, the world’s biggest producer, appears set to slip,” Bloomberg Intelligence analysts Richard Bourke and Grant Sporre wrote in a note. They see Chinese steel consumption ultimately fading to between 70% and 80% of its peak, in line with historic trends for other major economies.
The fresh slump for iron ore follows a short-lived rebound above US$100 a tonne last week, which some observers said was unlikely to last, given pressure on steel mills to cut output. From here, a drop below the recent intraday low of US$91.45 a tonne would push prices to the lowest since 2022.
- Bloomberg
Created by Tan KW | Sep 04, 2024
Created by Tan KW | Sep 04, 2024
Created by Tan KW | Sep 04, 2024
Created by Tan KW | Sep 04, 2024
Created by Tan KW | Sep 04, 2024