Iron ore set for weekly fall on faltering China demand
Iron ore futures remained on track for weekly losses despite their rebound on Friday, pressured by darkening demand outlook in top steel producer China due to a seasonal slowdown in construction.
The steelmaking ingredient’s benchmark June contract on Singapore Exchange SZZFM3 was up 4% at $99.55 a tonne by 0700 GMT. It dropped 1.8% to $94 earlier in the day, hitting its weakest since November, and has fallen more than 5% from last week.
The most-traded September iron ore on China’s Dalian Commodity Exchange DCIOcv1 fell as much as 2.5% to 665.50 yuan ($96.28) a tonne, its weakest since Dec. 2, before wrapping up daytime trade up 4% at 709.50 yuan. It was down 3.5% this week.
Providing some support to iron ore prices, industry consultancy and data provider Mysteel reported an uptick in the blast furnace capacity utilization rate among 247 Chinese steel mills covered in its weekly survey.
Mysteel said the rate rose for a second straight week to 89.93% over May 19-25, by another 0.8 percentage points from the prior week, as some mills in northern China restarted blast furnaces after maintenance work.
But the overall market outlook remains bearish.
The typical summer slowdown in construction in China beginning in June is expected to curb demand for steel.
China’s disappointing economic backdrop, with the latest data indicating a sputtering post-COVID recovery, and expected limits this year on domestic steel production in line with a decarbonisation goal have also curbed iron ore prices.
“If the administrative production reduction policy is implemented, it will be negative for iron ore in the medium term,” Huatai Futures analysts said in a note.
Coking coal DJMcv1 and coke DCJcv1 on the Dalian exchange fell 2% and 1.4%, respectively.
Also rebounding following selloffs earlier in the week, rebar on the Shanghai Futures Exchange SRBcv1 rose 1.5%, hot-rolled coil SHHCcv1 climbed 1.8%, wire rod SWRcv1 gained 0.1%, while stainless steel SHSScv1 added 1.7%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Subhranshu Sahu, Robert Birsel)