Iron ore slumped as China’s persistently weak property market causes construction companies to hold back restocking of steel before the National Day holiday period.
(Bloomberg) — Iron ore slumped as China’s persistently weak property market causes construction companies to hold back restocking of steel before the National Day holiday period.
The steelmaking material tumbled as much as 4.3% on Monday, taking some of the gloss off last week’s 8.5% gain. Demand for steel typically accelerates ahead of the holiday, which falls in the midst of a usual seasonal upswing in construction activity in China.
The world’s biggest consumer of iron ore is still struggling to shake off its post-pandemic economic malaise. Some market watchers have been disappointed by Beijing’s efforts to support the construction industry, despite pro-growth pledges for the real estate industry from the Politburo.
“It’s been nearly two months since Beijing increased supportive rhetoric toward the economy at the July Politburo meeting, but there’s been no subsequent follow through in terms of significant funding commitments,” Astris Advisory Japan commodities strategist Ian Roper said. “Meanwhile, demand from housing and infrastructure construction — if anything — continues to worsen,” he added, forecasting that expected steel output cuts in the fourth quarter would push iron ore prices toward $90 a ton.
Less than half of at least 90 downstream construction companies planned to replenish their inventories before the holiday, with most expecting further price softening on weak demand, according to a survey by Mysteel. Among enterprises that focus on infrastructure projects, 43% have plans to restock steel, and of firms that mainly see to housing projects, the figure falls to 41%, it said.
Iron ore was 3.4% down to $117.05 a ton in Singapore as of 10:47 a.m. local time, after falling to a two-week low earlier Monday. Futures in Dalian lost 3%, while steel contracts in Shanghai both declined.
Base metals on the London Metal Exchange also dropped, led by zinc’s 1.1% fall as investors weighed the Federal Reserve’s higher-for-longer rates stance. Copper was down 0.2% and aluminum slipped 0.3%.
–With assistance from Winnie Zhu.
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