MANILA: Dalian iron ore extended losses to a 10th session on Thursday, set for the longest run of sell-offs on record for the steelmaking ingredient in China, where rising steel inventories and weak margins have prompted a slowdown in production.
The most-traded iron ore, for September delivery, on China’s Dalian Commodity Exchange ended morning trade 0.4% lower at 728.50 yuan ($108.56) a tonne, trading near a 16-week low hit on Wednesday. Dalian iron ore’s 10-day slump is the longest since the 2013 launch of futures trading for the commodity on the Chinese bourse.
But iron ore’s front-month July contract on the Singapore Exchange rose 3.1% to $111.45 a tonne, after Wednesday’s 5.9% slump. SGX iron ore, however, was on track for its steepest monthly fall this year and the third in a row.
“The lack of growth in economic activity has seen steel demand suffer. This has led to a build-up in inventories, which is finally leading to a slowdown in steel production,” said ANZ senior commodity strategist Daniel Hynes.
In the spot market, the benchmark 62%-grade material bound for China traded at $112.50 a tonne on Wednesday, based on SteelHome consultancy data, the lowest since Dec. 10 and down 31% from this year’s peak at $163 hit on March 7. “The market has lost confidence that Beijing will be able to support the economy,” Hynes said.
COVID-19 restrictions and disruptions to construction activity caused by heavy rains in some parts of China also weighed heavily on sentiment. Spot prices of construction steel rebar in China hit 18-month lows this week due to weak demand, according to Mysteel consultancy.
Construction steel rebar on the Shanghai Futures Exchange gained 0.3%, while hot-rolled coil added 0.1%, climbing modestly following recent sell-offs. Stainless steel shed 0.9%. Dalian coking coal shed 0.9% and coke dropped 1%.
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