Iron ore reaches new five-month low on renewed US bank crisis worries, weak fundamentals

BEIJING: Singapore and Dalian iron ore futures refreshed five-month lows on Friday, dragged down further by renewed fears of a US bank crisis and lingering worries of diminishing demand amid production reduction among some Chinese steelmakers.

Shares of US regional banks resumed their slide this week after the collapse of First Republic Bank, the third mid-sized lender to fail in two months.

“Ongoing turmoil in US regional banks continued to dominate headlines and markets overnight,” analysts at ANZ bank said in a note. Meanwhile, iron ore demand continued to shrink with the daily hot metal output among the surveyed 247 steel mills declining by 1.3% week-on-week to 2.41 million tonnes in the week as of May 5, data from consultancy Mysteel showed.

The benchmark June iron ore on the Singapore Exchange was down 5.02% at $94.45 a tonne, as of 0217 GMT, the lowest since November 28, 2022. The most-traded September iron ore on the Dalian Commodity Exchange (DCE) traded 3.69% lower at 678.5 yuan ($98.21) a tonne, as of 0211 GMT, the lowest since December 2, 2022.

“Some mills planned to increase equipment maintenance amid shrinking margins, which will further cap demand for iron ore in the short term,” analysts at Sinosteel Futures said in a note.

“We expect portside (iron ore) inventories to gradually step into a cycle of picking up later,” they added. Similarly, weak fundamentals continued to weigh on the other steelmaking ingredients, with coking coal losing 3.11% and coke falling 2.37%.

There is scheduled maintenance on 21 blast furnaces (BFs) in May, reducing capacity by 78,000 tonnes/day, and nine BFs will resume production within the month, increasing capacity by 32,000 tonnes/day, Mysteel said in a report.

Rebar on the Shanghai Futures Exchange fell 2.66% to a near six-month low at 3,544 yuan a tonne, hot-rolled coil retreated 2.9%, and stainless steel slid 1.2%.