Iron ore muted after China releases weak consumption data

SINGAPORE: Iron ore futures struggled for direction on Wednesday before erasing early gains, despite top consumer China pledging financial support, after a raft of lower-than-expected consumption data highlighted weak demand.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) was down 0.07 percent at 762.5 yuan (USD110.31) a metric ton.

The benchmark March iron ore on the Singapore Exchange was trading 0.28 percent lower at USD99.9 a ton, as of 0700 GMT. China’s central bank said late Tuesday it will step up financial support to boost domestic demand, as industrial overcapacity and lacklustre consumption weighed on business confidence and dampened growth outlook.

However, data showed on Wednesday that the country’s consumer inflation cooled in January, while producer price deflation persisted, reinforcing market calls for additional policy measures to address the supply-demand mismatch. The consumer price index (CPI) increased 0.2 percent year-on-year, below the 0.4 percent rise projected in a Reuters poll.

Meanwhile, the producer price index (PPI) fell 1.4 percent year-on-year, extending a years-long deflationary trend and continuing to weigh on industrial firms’ profits, indicating the need for more policy measures to boost effective demand and address deep-rooted imbalances in the economy.

China relies on exports to absorb its production capacity, but a growing list of anti-dumping measures and trade rules in destination countries could derail export-driven demand growth, particularly for Chinese steel exports.

With anti-dumping resistance hardening globally and China signalling tighter production discipline, export momentum is expected to fade into 2026, with total volumes falling by as much as 30 percent in 2026, according to an ANZ research report.

Other steelmaking ingredients on the DCE softened, with coking coal and coke down 0.31 percent and 0.86 percent, respectively.

Steel benchmarks on the Shanghai Futures Exchange were mixed. Rebar and wire rod lost 0.07 percent and 0.15 percent respectively, while hot-rolled coil and stainless steel steadied 0.06 percent and 2.22 percent respectively.