Iron Ore Plummets to Fortnight's Nadir Amid Sluggish Demand and Potential Steel Production Cutbacks

Iron Ore Futures Take a Dip Amid Subdued Steel Demand and Anticipated Production Cutbacks in China

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On Monday, iron ore futures experienced a decline, stirring concern among traders due to a subdued steel demand during the peak construction phase, and potential steel production cutbacks in the winter months in China, a major consumer. This comes as the pre-holiday restocking phase winds down.

The favored January iron ore on China’s Dalian Commodity Exchange (DCE) wrapped up the daytime trading session 2.03% lower at 844.5 yuan ($115.55) per metric ton, marking its lowest since September 11.

Likewise, the standard October iron ore on the Singapore Exchange witnessed a decrease of 4.23% at $116.05 a ton, by 0704 GMT, also plummeting to its lowest since September 11.

Pei Hao, a seasoned analyst at the international brokerage firm FIS, based in Shanghai, remarked, "The market signals indicate that demand has plateaued, following unanticipated lower steel sales in September and October. This is coupled with the end of raw materials restocking needed to cater for the production demands during the upcoming week-long holiday hiatus."

China is gearing up for a week-long festive break starting September 29, celebrating its Mid-Autumn festival and National Day.

Moreover, contributing to the iron ore price dip were fears surrounding a stricter monetary stance, as mentioned by analysts at ANZ Bank in a commentary.

Highlighting the monetary caution, U.S. Federal Reserve officials, last Friday, hinted at the likelihood of more interest rate increments, even though the decision was to maintain the benchmark federal funds rate unchanged in the recent meeting.

Additionally, China Evergrande, a beleaguered real estate giant, disclosed its incapability to roll out new debt offerings due to an ongoing investigation into one of its subsidiary entities.

Other components crucial for steel production also witnessed a downward trend, with coking coal DJMcv1 and coke DCJcv1 on the DCE dropping by 0.84% and 0.74% respectively.

Despite a halt in coal production in Panzhou city for a day following a tragic coal mine mishap that claimed 16 lives on Sunday, as reported by consultancy firm Mysteel, coal prices too experienced a downtrend.

On the Shanghai Futures Exchange, steel benchmarks dipped owing to a softening in raw materials prices and demand. Rebar SRBcv1 descended by 1.51%, hot-rolled coil SHHCcv1 by 1.09%, wire rod SWRcv1 by 0.29%, and stainless steel SHSScv1 by 0.59%.

Source : Reuters (Reporting by Amy Lv and Dominique Patton)