MANILA: Benchmark iron ore futures in Asia tumbled on Monday, as a seasonal slowdown in construction activity in top steel producer and consumer China dampened sentiment, pulling down prices of the raw materal to the lowest in nearly two weeks.
The most-traded September iron ore on China’s Dalian Commodity Exchange dropped 5.2% to 1,165 yuan ($180.57) a tonne, its weakest since June 10.
The most-active July contract on the Singapore Exchange slid 2.9% to $200.90 a tonne, the lowest since June 9.
“It’s safe to say that China’s seasonal slowdown in construction steel demand has now arrived, with rebar inventories at steel mills and warehouses across China both showing firm builds,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.
Iron ore purchases by mills are expected to slow down as the rainy season curbs construction activity in many parts of China.
Steel futures also fell, with rebar on the Shanghai Futures Exchange down as much as 2.4%.
“Barring any extenuating circumstances, Chinese steel rebar benchmarks should in theory now start their journey south based on our expectations for H2 supply and demand fundamentals,” Widnell said.
Weaker rebar prices “have also likely contributed to ‘margin suppression’, which will have put a dampener on potential upside scope” for iron ore, he said.
Spot prices of seaborne and portside iron ore in China have held ground above $200 a tonne since May 31, despite government efforts to rein in commodity inflation partly driven by speculative trades that propelled both iron ore and steel prices to record peaks last month.
Shanghai hot-rolled coil fell 2.3%, but stainless steel advanced 0.7%.
Dalian coking coal slid 3.7% and coke shed 3.8%, after seven straight sessions of gains.
China’s state planner and market regulator have jointly launched an investigation into coal prices and vowed to crack down on speculation and hoarding.