Economy 2 MIN READ

Sluggish China steel demand drags iron ore to over four-month lows

April 25, 2023By Reuters

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

The most-traded September iron ore on China’s Dalian Commodity Exchange fell as much as 1.5% to 713.50 yuan (USD 103.31), its weakest since Dec. 21. It was down 0.8% at 719 yuan by 0606 GMT.

Iron ore’s benchmark May contract on the Singapore Exchange, also dropped by up to 1.5% to hit USD 102.35 a tonne, 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%-grade iron ore for delivery to China dropped to USD 110 a tonne on Monday, the lowest since early December and down nearly 9% this week, according to SteelHome consultancy.

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

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.

Rebar on the Shanghai Futures Exchange fell 1.2%, hot-rolled coil shed 1.1%, while wire rod climbed 2.7% and stainless steel gained 0.4%.

Coking coal and coke on the Dalian exchange declined 0.6% and 1.7%, respectively.

(Reporting by Enrico Dela Cruz in Manila; editing by Eileen Soreng)

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